Ditch the presents this Christmas and use the Junior ISA to give your child £3,000

•    Luckiest Junior ISA holder is an 11-year-old with a pot of around £110,000
•    For the price of the latest LOL Doll you could instead give your child £3,000 on their 18th birthday
•    Investing the full allowance each year would give a £130,000 18th birthday present

Laura Suter, personal finance analyst at investment platform AJ Bell, comments:

“While your child isn’t going to write to Santa asking for a contribution to their Junior ISA, their future self will thank you more than giving them the latest must-have toy. Parents often lament the sea of plastic toys they end up in after the Christmas period, so they could leave the present buying to others and instead put some money away for their child’s future. 

“For the price of the latest LOL Doll Glamper fashion camper or Lego set every Christmas, parents could instead hand their kids £3,000 on their 18th birthday**. If you paid in the full ISA allowance, currently £4,368 a year, ever year until they turned 18 they’d have a pot of more than £131,000*** on their 18th birthday. 

“Lots of parents keep their Junior ISA accounts in cash, but it’s the ideal long-term investment with the money locked up for up to 18 years. The top Junior ISA cash rate at the moment is 3.6% from Coventry Building Society, or 3.25% from NS&I if you want an account you can access online. Putting the full annual limit into the top cash account in every year would give your child £114,000 on their 18th birthday – more than £17,000 less than could potentially be achieved by investing it. Parents putting money in cash accounts also need to keep an eye on it to make sure the interest rate isn’t slashed, or that they switch accounts if it is.

“The luckiest child with AJ Bell is an 11-year-old who has around £110,000 in their Junior ISA, after a mixture of sizeable annual contributions and some savvy investing. But the average pot with AJ Bell is a more relatable £9,000.

“Parents are generally investing in a mixture of active funds and passives in Junior ISAs. A number have plumped for lower cost all-in-one funds, such as Vanguard Lifestrategy or AJ Bell’s passive funds, which spread the money across different markets and assets. Investment trusts are also very popular, with Scottish Mortgage, F&C Investment Trust and Witan among the most popular trusts. Among funds Fundsmith Equity, Lindsell Train Global Equity and BMO Global Smaller Companies are the most popular.

“You child isn’t going to be able to parade their Junior ISA account around the playground and show it off to their friends, so understandably might be a bit disgruntled at the gift. To avoid tears before the turkey dinner, firstly, you can agree with grandparents and other family that they all buy one fewer present and contribute some money to the JISA instead. Or you could get them to still give presents, meaning your kids will have something to unwrap, while you gift money.”

What your money could grow to:

Most popular Junior ISA investments, by age group:

** Based on £100 contribution every year and 5% a year growth after fees.
*** Assumes full Junior ISA allowance contributed ever year, and that it increases by 2% inflation each year, with your pot growing by 5% a year after fees.