November 2011 saw the introduction of the Junior ISA (or JISA), which has given parents and relatives a straightforward way to save for their young ones without worrying about taxation. Recent research has revealed, however, that 80% of JISA savers are planning to wait until the junior in question is 16 or older before telling them about the money.
The study, by Willis Owen, found that 82% of JISA investors have been saving for their child or young relative since they were less than five years old, which could see them accumulate quite a bit of money over time. The JISA allowance currently stands at £4,260 per tax year, with it due to rise in line with CPI inflation to £4,368 on 6 April, as announced in the Budget earlier this week. Over 10 years, that's quite a lot of money, so it's no wonder that some parents may be reluctant to tell their offspring.
While the survey found that 39% of those choosing to wait are doing so to surprise the recipient, this is closely followed by 34% who are worried their child is not responsible enough yet and 23% who don't want them to feel spoilt. However, this could cause problems, as JISA rules state that a child can manage their own JISA from the age of 16, with the money being released to them on their 18th birthday.
Adrian Lowcock, head of Personal Investing at Willis Owen, suggests this research confirms that "most people are leaving it too late to have conversations about personal finances with the younger generation. Learning about money and becoming financially aware is a long process, but it should start as early as possible.
"Most of our financial behaviours and disciplines come from our families, so if you want to instil good behaviour you will need to practice what you preach." This means that those 42% who'd like the money to remain invested in an adult ISA would do well to teach their young ones the value of interest as early as possible.
Although piggy banks are an old favourite in teaching small children the value of saving, if you want to add interest to the mix then a children's savings account might be a better idea. This would give your child somewhere to put their pennies and see them gain interest over time, and you'll still be able to keep their future savings separate in a Junior ISA.
If you're really not sure you can trust your child with a pot of savings at the age of 18, you could also choose to put money into a separate savings account of your own and then pay for their university fees or house deposit directly.
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