What is a Junior Cash ISA?
A Junior Cash ISA is a type of tax-free cash savings account for parents to open for their children.
Just like all other types of ISAs, JISAs are free from the following taxes that are normally applicable to regular savings accounts:
- Income tax on the interest earned from cash savings
- Income tax on dividends held in Stocks and Shares JISAs
- Capital Gains Tax on investment growth in Stocks and Shares JISAs
How do Junior Cash ISAs work?
Here are the most important features and rules for Junior Cash ISAs:
- They are opened for a child under the age of 18 and can only be opened by a parent or legal guardian of that child
- Although a parent or legal guardian must open and control the JISA, anybody can contribute funds, including grandparents and family friends
- You can save up to £9,000 in a JISA each tax year per child – this is called the annual JISA allowance, and it refreshes each year and the amount can fluctuate
- No money can be withdrawn from a Junior ISA until the child reaches the age of 18
- At 18, the JISA turns into an ordinary ISA account in the sole name and control of the child, and all withdrawals are permitted
What do Junior Cash ISAs invest in?
Junior Cash ISAs cash savings accounts in which you earn interest on your cash balance.
Most Cash JISAs offer a variable interest rate on your savings which generally fluctuates based on the Bank of England’s base interest rate.
Some JISAs will offer better interest rates than others, so it’s important to compare Cash JISA providers and shop around for the best return on your savings.
One of the main attractions of Junior Cash ISAs is that your savings can’t go down in value.
The value of the account will always be at least equal to the amount that you put in.
What’s the difference between a Junior Cash ISA and a Junior Stocks and Shares ISA?
While Junior Cash ISAs generate a rate of interest on your cash, Junior Stocks and Shares ISAs allow you to invest the money into shares and funds on the stock market.
This could be in the form of:
- Individual shares of companies
- Managed funds
- Ready-made investment portfolios
- Tracker funds, index funds or other tracker investments like ETFs
The potential for high returns is much greater in a Stocks and Shares Junior ISA compared to a Cash ISA, but there is also a risk that your investments can go down in value as well as up, so you could lose money.
How to compare Junior Cash ISAs
Here is a list of the most important features of Junior Cash ISA to consider when you’re comparing providers:
- Junior Cash ISA rates
- How you can open the account – some Cash JISAs can only be opened online, and some can only be opened in a branch or over the telephone
- How you can monitor your account – is there a mobile app, online platform or can you get information over the telephone?
- What are the customer service ratings like for the JISA provider, and how much do you value this?
How to open a Junior Cash ISA
Once you’ve found the best Junior Cash ISA for you, you can normally open a JISA online within a few minutes.
Alternatively, there are child Cash ISA accounts that you can open over the telephone or in a branch depending on what is most practical for you.
You can contribute funds with a debit card payment.
Transferring a Junior Cash ISA
You can also transfer existing Junior Cash and Stocks and Shares ISAs into a new Junior Cash ISA, as well as any existing Child Trust Funds (these products have now been discontinued).
To transfer an existing JISA into a new Cash Junior ISA, you’ll need to complete your new provider’s Junior ISA transfer form. Your new provider will then complete your transfer for you on your behalf and notify you when the transfer completes.
A Junior ISA transfer won’t count towards your child’s JISA allowance of £9,000.