Should you get your child a junior ISA and is it worth the investment?

Here are some reasons why you might want to reconsider purchasing a Junior ISA, even though it might seem like the best option when saving for your child, according to James Mackreides

Children should be saved for, and a Junior ISA can be a fantastic way to give them a head start in life. But is it worthwhile to get a Junior ISA?

There are valid reasons to steer clear of the tax-free savings product entirely, and it is not suitable for everyone.

Although you can currently put up to £9,000 for your child each tax year in a Junior ISA, here are some reasons why I believe you might be making one of the biggest financial planning errors.

This may seem like a controversial viewpoint, but if you are making lump sum contributions as you can or have a direct debit going into your child's Junior ISA, stop reading this first.

Has your ISA been topped off?

Put an end to your child's Junior ISA contributions if you haven't yet spent your own ISA funds. First, make the most of your allowance.

Every adult in the UK is given a 20,000 ISA allowance each tax year, which is 20,000 plus your income that is protected from the tax collector. Additionally, you can use cash as well as stocks and shares to fund multiple ISAs.

Now, this is logical for a variety of reasons.

The first is that funds invested in a Junior ISA are locked in. In other words, once you put it in, it instantly belongs to your child and, once they turn 18, it legally becomes their money to do with as they please.

This implies that in the event of a financial emergency, you will not be able to access that money.

When you have funds in your own ISA, you can access them whenever you'd like and, if you'd like, use them to support your child.

Top up your ISA first and give yourself the flexibility you might need tax-free savings are like gold dust. Imagine being given a plate of food and being told that you can divide it however you like as long as you fill it up. However, once your child's plate is full, the food will only be theirs. You would plate up!

According to recent data from HMRC, 60% of adults in the UK do not have an ISA, which means that millions of people are losing out on tax-free investments and savings.

A big sum of moneyis an 18-year-old ready for it?

Although we all like to think that our children will grow up to be responsible adults, the harsh truth is that all children have the potential to become delinquents.

The main flaw in Junior ISA is that parents cannot access the funds and must legally transfer ownership to their child when they turn 18.

If you're not worried about this, you should be. The truth is that you have no idea if your 18-year-old will be prepared to handle possibly a sizable amount of money.

Even though you might like to think that they will use it for driving lessons, additional education, or even a down payment on a home, the truth is that they might end up using it for a party, vacation, or worse!

According to the rules, they are free to take the lot and use it however they like.

There are legitimate worries; some Reddit users want to know if they can prevent their child from spending the money, while others are concerned about giving their teen too much too soon.

JISA caution: "Assist. I have to figure out how to prevent my son from using his £200k Junior ISA to buy a Lambourghini. "from r/FIREUK Comments on Junior ISA when you turn 18 from r/UKPersonalFinance If you have a Junior ISA, make sure to instill sound financial practices as early as achievable. Financial education can help prepare an 18-year-old if you are willing to take the chance of giving them a sizable sum of money.

In the UK, 54.4 million children lack the essential financial skills they will require as adults, according to The London Institute of Banking and Finance's 2022 - 2023 Young Persons Index.

Can a Junior ISA be purchased?

When people tell me they are saving money for a Junior ISA but have little to no personal savings, I find it extremely concerning.

Start by protecting your own finances. Working diligently on a Junior ISA while simultaneously worrying that you won't have enough to reach your financial objectives is pointless.

I keep seeing stories about families having trouble paying for childcare and living expenses like rising energy prices.

Prior to securing funds, it is crucial to consider your personal financial safety net.

The adage "pay yourself first" is likely familiar to you, and it applies to every facet of budgeting, including providing for your kids.

Invest in your wealth first.

When will the Junior ISA be correct?

A Junior ISA may be wise for a variety of reasons.

For instance, you might want to think about placing money that your child receives as a gift into a Junior ISA.

It also makes sense to move any Child Trust Fund funds into a Junior ISA since you will have more options and pay less.

But, if you're just considering opening an account, keep in mind that it shouldn't come at the price of rigid finances, your own yearly tax-free allowances, or the possibility that you might want more control over how they spend the money once they're 18.