How to invest for your child

Whether you have a child or grandchild, safeguarding their future and giving them the best start in life is all any parent or grandparent wants to do.

Putting money aside for your child’s future will not only bring you peace of mind but, if you get them involved in the saving process too, it can also help to teach them valuable life lessons in managing their money. You’ll also know that once they grow up they will have money put aside to put towards the next step in their life.

Whether it’s a lump sum investment or monthly savings for the longer-term, we’ve put together our top tips on how to invest for your child as well as considering the most effective way you can go about saving towards your child or grandchild’s financial future with us.

Why it’s worth investing for a child

There are several reasons why it is worth investing for your child’s future. Making financial investments for your child can:

Help to give them financial support for the adult years ahead
Provide a cash sum when they need it the most
Give you peace of mind that they have savings growing as they do
Teach them life lessons in money management
Help them buy their first car, pay towards university fees, or even help with a deposit on their first home.

Are savings and investments for a child subject to tax?

According to HMRC, there is usually no tax to pay on children’s accounts.

However, a parent or grandparent should inform HMRC if, in that tax year, the child receives more than £100 in interest from money given by a parent. This is known as a £100 limit and doesn’t apply to:

Money in a Child Trust Fund or Junior ISA
Money given by grandparents, friends or relatives

The parent will also have to pay tax on all the interest if it is above their own Personal Savings Allowance – an allocated amount of interest depending on your tax band that you don’t have to pay interest on.

However, it’s not as complicated as it may seem! With the POIS, you can choose our Children’s Tax Exempt Plan, which offers a tax-free way to save a cash sum and our tax-free Junior ISA (JISA). We go into more detail on each of these options below.

Get in touch if you would like more information on the tax free children’s investment options offered by us.

What investments can I make for my child?

Providing for your little ones is so important – it opens a whole host of opportunities for them once they have grown up and gives you peace of mind that they have that financial boost to help get them started.

If you’re looking at investing a lump sum or making regular monthly payments, the POIS provides two options for you to invest for children, a Junior ISA (JISA) and our Children’s Tax Exempt Plan.

Junior ISAs (JISA)

When it comes to children’s investments, a Junior ISA (JISA) is a popular way to help to build a financial future for your child.

Junior ISAs are tax-free savings accounts for children under 18 which were launched in 2011 to replace the Child Trust Fund. They must be opened by a child’s parent or guardian, but once opened anyone can pay the Direct Debit or add lumps sums. Children aged 16 or 17 can even open a Junior ISA themselves.

There are two types of Junior ISA:

A Junior Cash ISA: Where your money will not be at risk but the potential return over the longer term may be less
A Junior Stocks & Shares ISA: Where there is a chance your money may be at risk but the potential return over the longer term may be more

The current maximum that you can pay in per tax year (running April to April) for a JISA for is £9,000.

Our Junior ISA is provided by Foresters Friendly Society, which owns POIS, and offers:

A Stocks & Shares Junior ISA, with savings of up to £9,000 each year
Savings starting from just £26 a month

The potential for your money to grow through the addition of annual bonuses and a possible final bonus when the child reaches 18

Funds can be transferred from other Junior ISAs and Child Trust Funds, adding extra flexibility
Family and friends can pay into your child’s JISA – making it an ideal option for presents and milestone gifts
Access to membership benefits for your child at no additional cost

You should be aware that in some investment conditions your child may not get back the full amount originally invested and the addition of bonuses is not guaranteed. Also, bear in mind that tax rules may change and depend on individual circumstances. Member benefits are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

Find out more about the POIS Junior ISA here

Opening a Children’s Tax Exempt Plan is an affordable and regular way to invest for your child and offers a tax-free cash sum when they need it most – whether it is help towards getting on the property ladder, paying for a wedding, university fees or help for them to go on travelling adventures.

Children’s Tax Exempt Plan

This type of plan offers an affordable option for you to invest in your child’s future and give them a head start in life.

With POIS, our Children’s Tax Exempt Plans offers:

An affordable regular savings option – pay in just £25 a month
A choice of how long you want to save – from 10 – 25 years
Anyone – parents, grandparents, aunties or uncles – can set up a plan for a child
Flexibility to begin saving when you feel ready – the plan is available for children aged 0 – 15
It can be held alongside a Junior ISA or Child Trust Fund, so you can maximise tax-free savings for your child
Access to membership benefits at no additional cost

As your contributions are invested in a fund which includes stocks and shares, the value of the plan may fall as well as rise and your child may get back less than you have paid in. Tax rules may change and depend on individual circumstances. Member benefits are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

Can I invest on behalf of my grandchild?

The short answer is, yes!

With the POIS, anyone can open a Children’s Tax Exempt plan on behalf of a child, including grandparents.

A Junior ISA (JISA) must be opened by the child’s parent or guardian, however once opened, anyone, including a grandparent, can invest on behalf of their grandchild by setting up a Direct Debit or by adding lump sums to the JISA.

Investing a lump sum for a child vs regular monthly investing

A Children’s Tax Exempt plan offers an affordable option to invest a set amount of £25 per month which is paid by Direct Debit straight into the account. It is not possible to make a lump sum payment into the POIS Children’s Tax Exempt Plan.

A child cannot hold more than one Children’s Tax Exempt Plan at one time so if Granny has already opened a plan, no one else can for the same child.

If you are looking at investing a lump sum for a child or saving more than £300 a year, a Junior ISA (JISA) is a more suitable option. The current limit for a JISA for the 2022/23 tax year is £9,000 and a minimum lump sum investment of £500 is needed to open a Junior ISA with POIS, after which top ups from at least £50 can be made.

When would my child receive a payout from the investment?

Children’s investments, depending on the plan you choose, come with different timescales as to when it comes to your child receiving a payout. If you choose to take out a Children’s Tax Exempt Plan with POIS, your child must be at least 16 years old before they can access the cash sum.

If you opt to open a Junior ISA (JISA), your child can take control of the account once they turn 16. However, they cannot withdraw the money in it until they are 18.

Invest for your child with POIS today

Give your child a head start in life by choosing a JISA or Children’s Tax Exempt Plan with POIS today.

Whether you want the peace of mind that they have security, or have your sights set on a cash lump sum for university, travels or a wedding – we can help you and your child put financial building blocks in place.

Click now to find out more about our range of savings for children which will give you peace of mind and help to build savings for their future. Apply online today!

This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser, who may charge a fee, if you want advice.