Stuck for ideas on what 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? How about putting money in their junior individual savings accounts (junior ISAs or JISAs)?

Junior ISAs provide the same benefits as adult ISAs (in that there is no tax on income or profits made on the investments in the ISA). The money is locked away until the child reaches 18, at which point they can withdraw the money or leave it invested.

Only a parent or legal guardian can open and manage a junior ISA¹, but anyone can pay into it (up to the annual allowance of £9,000 a year²). All you need is a debit card and the child’s JISA account number.

So, if you already have a Junior ISA, consider letting your friends and family know they can contribute. And if you haven’t opened a Junior ISA yet for your children, consider whether this might be a good reason to do so.

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.

Educational possibilities

Your children or younger relatives may not appreciate such gifts straightaway, but a junior ISA could be a good way to introduce them to the concept of investing and the power of compounding. This is where you earn a return on the growth of the investments as well as the original contributions, so wealth builds up over time.

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, younger investors have a greater chance of seeing their capital grow.

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, based on a hypothetical return of 5% after costs³. This could be a useful nest egg to put towards a house deposit or education costs.

Making contributions to a Junior ISA opens up educational possibilities too. You can help better prepare your children for some of the financial responsibilities of adulthood by discussing the importance of starting early, saving regularly and investing for the long-term to achieve their financial goals. You can read more here about teaching your children about the value of money.

How to contribute

At Vanguard, you’ll find the ‘gift money’ option on 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.

¹ Only one ‘registered contact’ can provide instructions to a JISA manager, including 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.

² In the 2022-23 and 2024-25 tax years.

³ Source: Vanguard calculations as at 23 November 2023. Returns are based on hypothetical returns of 5.7% a year from shares minus costs of 0.7%. These projections should be regarded as hypothetical in nature and do not reflect or guarantee future results.