Parents could double savings for their child with simple ISA trick

06 May 2024 , 12:48

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Parents could supercharge their savings for their child (Image: Getty Images)

Parents who are saving into a Junior ISA can more than double the money they’ve put away by switching it to another account when their child turns 18.

You can save up to £9,000 into a Junior ISA each tax year, with interest added to your savings. New calculations for the Mail on Sunday show that someone whose parents put away just £100 a month since birth into a Junior ISA would have around £35,000 by the time they turned 18.

When the child turns 18, the Junior ISA turns into a regular ISA - but if you open and move the savings into a Lifetime ISA, you could more than double the original worth. You can save up to £4,000 every tax year into a Lifetime ISA, with the Government then giving you a bonus of up to £1,000 a year.

The Mail on Sunday estimates that it would take until the child turns 28 for the entire contents of the original Junior ISA to be moved across to the Lifetime ISA. If you take the yearly Government bonus and interest into account, it is estimated that the original savings would then be worth £75,000.

If you’re able to save the full £9,000 each year into a Junior ISA, it is estimated the total savings would be £273,000 by the time the child turns 18. If you then follow the same process by moving the money into a Lifetime ISA, the Junior ISA would be worth £376,097 by the time they turn 27, and the Lifetime ISA would be worth £65,848.

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This makes combined savings of nearly £442,000. This assumes 5% investment growth per year, but no extra money added to the nest egg after the child turns 18. These savings would be enough to buy a home outright in most of the UK, with the average house price currently at £285,000.

Jason Hollands, of investment group and Isa provider Bestinvest, which compiled the figures, said: “Such a strategy could potentially help them own their own pad in their early to mid-twenties, when many young people are typically stuck in the trap of rental accommodation.”

Levi Winchester