Stuck for presents to buy your kids or grandkids this Christmas? What about your friends’ children, godchildren, nieces and nephews?
Looking for something practical to give them, in addition to all the fun stuff you hope they get too?
Well, here’s an idea – one that doesn’t create plastic waste or risk being the wrong size or has to compete for their attention with all the other toys or gadgets they might get. How about putting money in their junior individual savings accounts (Junior ISAs)?
Whatever the occasion – be it a birthday or public festival – did you know that you can directly gift contributions into a Junior ISA? All you need is the child’s full name (as it appears on their account), their account number, plus your debit card details.
Once a Junior ISA has been opened (usually by a child’s parent or legal guardian1), friends and family can contribute additional lump sums up to the annual total amount allowed by the government (£9,000 in the 2022-23 tax year).
So, if you already have a Junior ISA and friends or family are stuck for ideas on what to buy your children, consider passing on the account details to your friends and family. Let them know, so they have the option to invest in the future of your children too.
And if you haven’t opened a Junior ISA yet for your children, consider whether this might be a good reason to do so. Similarly, if you have younger relatives and would like to gift them money this way, let the parents know.
To open a Vanguard Junior ISA account, you need a minimum lump sum investment of £500 or monthly direct debit of £100.
But once the account is set up, there are no limits to how much can be gifted up to the total annual allowance. And every little helps, especially when you’re investing over time, thanks to the power of compounding.
Your children or younger relatives may not appreciate such gifts straightaway. But investing money for the next generation inside a tax-efficient Junior ISA is an upgrade on simply slipping bank notes inside an envelope.
The value of the money invested may fall as well as rise, such is the nature of investing, but with many years potentially ahead of them, they have a greater chance of seeing their capital grow.
Making gift contributions to a Junior ISA opens up educational possibilities too:
- By building on previous contributions and adding to the account’s compounding power, your gifts could help them build a nice nest egg by the time they reach adulthood. For example, a total £500 paid into a Junior ISA each year for 18 years – whether through regular saving, ad hoc gifts or both – would grow to around £15,000 on an average return of 5% after costs.
- You can also help better prepare them for some of the financial responsibilities of adulthood by joining the discussion around how they can achieve better investment outcomes by diversifying their investments across global markets, and by following Vanguard’s four investment principles.
- And you could get them to think about what their investment goals might be and how best to align those objectives with their principles.
At Vanguard, you’ll find the ‘gift money’ option as soon as you click through to our Junior ISA page. All you need is the child’s name and account number plus your debit card details.
It’s then up to the registered parent – potentially in consultation with the child – to invest that money. Just remember to tell them that the money is there.
Saving in a Junior ISA for a child or younger relative could give them an important leg-up in life just when they need it most and help fund their ambitions.
As the seasonal saying goes: If your gift is to encourage others, be encouraging.
1 Only one ‘registered contact’ can provide instructions to a JISA manager, including the setting up direct debits for regular payments. For an account holder aged under 16, this means a person with parental responsibility for a child. If aged between 16 and 18, the account holder can become the registered contact.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.
This article is designed for use by, and is directed only at, persons resident in the UK.
If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.
The information contained in this article is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.
The information in this article does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this article when making any investment decisions.
Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.
© 2022 Vanguard Asset Management Limited. All rights reserved.