What Is A Children ISA?
The days are gone where higher education was free and open to all. Now when your child reaches the age of 18 and declares that they want to go and study at university in the UK, be prepared for a costly experience.
In 1998 tuition fees were first charged for undergraduate courses at around £1,000 per annum. By 2012 the government had increased the maximum to be charged per year of education to £9,000. Despite protests 64 universities in the UK declared that it would charge the maximum term fees.
Given that a degree course lasts for 3 years the total payable for a BA Hons or Bsc Hons course now stands at £27,000.
This is for tuition fees alone, on top of this is the living costs of rent, travel, study materials etc. Education for your children and grandchildren of the future is going to be a costly experience.
So its best to start saving early!!
The official term for a ‘Childrens ISA’ is a ‘Junior Individual Savings account’. The Childrens ISA is a tax efficient saving mechanism that promotes the saving of funds for when the child grows to the age of 18. Typically it will be for education but it can be used for whatever is required at that specific time. Once the money is in the childrens ISA it is the childrens right at the age of 8 to do as they like with it, it belongs to them.
A child can not touch the ISA until he/ she reaches the age of 18.
Not every child under the age of 18 is eligible for the Childrens ISA however. Children born between 1st September 2002 and 2 Jan 2011 have Child Trust Funds. Within Child Trust Funds the government also provided a level of funds, where as the Childrens ISA is solely a tax effiecient savings vehicle.
There are 2 types of Childrens ISA
A Junior Cash ISA where the interest is not taxed and a Junior Stocks and Shares ISA where returns are, in the main, tax free. The cash ISA is slightly less risky with the only risk being the level of interest earned not being more than the increases in inflation over the period. Investment ISA’s suffer the exposure to the stock market. But, in general, over a long period of time, the stock market tends to have greater rewards than the value of savings interest.
Parents can save or invest in the ISA’s upto £3,600 per year, and receive the benefit of not being taxed upon this income.
Louis Hard shares his interest on savings for children on behalf of The Childrens ISA Ltd