A lack of awareness of the new Junior ISA which is to be launched next week could see kids miss out on millions of pounds in savings, it has been warned.
Around three quarters of parents know nothing about the new tax efficient savings accounts that are being introduced from 1 November to replace the child trust fund, according to Family Investments.
The research suggests that as many as half a million of the 700,000 children born so far this year are unlikely to have an account opened on their behalf, mainly because parents do not have a clue they are being introduced.
As of next Tuesday, the parents of anyone born on or after 3 January 2011 will be able to open a Junior ISA for their child, as will those who have a child under age 18 who does not have a child trust fund.
Parents, grandparents, other family members and friends are all allowed to make payments to the account (as are the children themselves!) up to a maximum of £3,600 per year.
As is the case with the adult version of the ISA, it is possible to invest the money in stocks and shares, cash or a combination of the two.
Any money that goes into the Junior ISA cannot be accessed until the child reaches 18 – and at that point, it is only the child who can access the money, not the parents!
Despite the low awareness levels of the new products, more than three quarters of parents believe that saving for their children is important.
Furthermore, when the concept of the Junior ISA was explained, six in ten said they thought it sounded attractive.
Kate Moore, head of savings and investments at Family Investments, said that based on the provider's experience with child trust funds, parents contribute an average of £27 a month to the accounts.
"Applying these figures to Junior ISA, newborn children could miss out on up to £165 million within the first year of the new scheme alone," she added.
"In many ways this is just the tip of the iceberg as the Junior ISA is open to any child aged under eighteen who does not have a child trust fund."
Keep a close eye on Moneyfacts.co.uk for more Junior ISA news both as the launch date approaches and when the accounts are finally introduced.
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