Change your children’s (or grandchildren’s) life with a JISA

Are you expecting a new addition to the family, be it a baby of your own, a grandchild or even a godchild? If so, you will think about ways you can give him or her the best possible start in life.

And although beautiful baby gifts are wonderful in the moment, this is the very best time to think about the future. Not just in terms of years, but decades.

For many parents, a new baby is a source of financial worry – as well as overwhelming joy, of course! And never more so than now with the cost of living rising and wages stagnating.
Parenthood is a life-changing commitment that changes your financial, social and professional priorities for at least 18 years. The good news is that if you are able to start investing now, the sheer timescale involved can be a tremendous asset.

How much does it cost to raise a child?

Of course, it’s important to be realistic about costs in the short and medium term too. Moneyfarm recently conducted research to establish the cost of raising a child in London today. We considered more than 150 different metrics, from babysitters to online subscription services.

Food is an obvious expense, and one that becomes progressively more expensive as your child – and their appetite – grows. In fact, it increases in cost from an average of £2,700 for the ages of nought to three to a huge £9,959 for the hungry teenage years of 15 to 18. The rising cost of living, and instability caused by everything from global conflict to climate change, could mean these figures only grow in the coming years

Of course, there are other costs to consider that did not exist a generation ago. From Netflix to PlayStation Plus, online subscriptions are an essential part of childhood and young adulthood.

That 15 to 18 period is also likely to see some £250 spent on games consoles, £389 spent on smartphones and £529 spent on a computer or laptop

In addition to food and technology, there are a plethora of expenses to consider, from clothing to public transport, and holidays to pocket money, all of which tend to rise on cost as a child makes their way to adulthood. Our research found that the overall figure for the cost of raising a child is between £129,000 and £327,000 over the full course of 18 years. That’s between £7,100 and£18,100 a year.

Investing for the future

Of course, all these costs are just one side of the balance sheet. You can’t really put a price on the other side: the joy of parenthood, and of seeing a beloved baby grow into a happy child and, hopefully, a flourishing young adult.

But, in the meantime, the costs keep rising! And while there is little anyone can do to mitigate them in the short-term, wise parents, grandparents and godparents can have an enormous impact in the long-term. Because at some point they will reach adulthood and start thinking about buying a property and starting a family of their own. Which is where a Junior ISA can make a life-changing difference.

What is a Junior ISA?

A Junior ISA is not just a piggy bank that allows benefactors to save for a child’s future. It is a powerful financial instrument, fuelled by time itself. And time is one asset with which children are blessed. They have their whole lives ahead of them. And, precisely because their parents generously cover their costs for the first 18 or 20-odd years of their lives, any cash given to them as a gift by their parents or anyone else can be put to work for the future.

Given the power of compound interest over time, that first couple of decades can be a lucrative opportunity to grow their wealth exponentially. If you start a Junior ISA for a new-born baby with £20,000, and add £200 every month, by the time they turn 20, that pot could be worth over £120,000*. Just think of the difference a sum like that could make to a young life.

*Assuming an average yearly return of 6%. This is purely theoretical,

Lifestyle impact of a Junior ISA

In fact, even a much smaller investment could easily cover the cost of higher education. A Junior ISA could be the difference between taking on debt, and stressing over whether a course is affordable, and having the freedom to choose the best possible graduate and postgraduate courses, at home or abroad, debt and worry free.

A healthy nest egg could also allow that young person to start a business. Fresh out of education, young people are typically full of energy, ideas and ambition. Think of the advantage your child or grandchild would have if they could back those natural assets with hard cash. A Junior ISA could be the foundation of a successful business, innovative organisation or even a career as an artist or musician! Financial resources mean the freedom to do what they want to do, without having to waste years scrimping and saving.

A huge leap onto the property ladder

Another major worry is housing. At a time when many young people struggle to get onto the
housing ladder, especially in London and the southeast, it makes sense to think ahead. In 20 or 30 years, it could be virtually impossible to buy a home in London without a serious head start. A Junior ISA could provide the deposit a young person needs to land a home in which to settle down and start their own family.

Which brings us back to the cost of raising a child. A Junior ISA could enable your child or grandchild to manage the no-doubt even higher costs of parenthood in the 2040s and 50s. Now, that’s an investment in the future.

Finally, if they are in a position to simply keep up the contributions, the beneficiary of a Junior ISA could expect to be a millionaire before the age of 50. That makes a JISA one of the best gifts you could possibly give your children.

Keep your eyes on the (future) prize

The key to all of this is long-term thinking. There’s little point checking the value of a Junior ISA every day, or even every few months. The benefits accrue over years and decades, and come to those willing to keep their eyes on the long-term prize rather than worrying about the ups and downs of the stock market. What matters is the long-term trend, and that trend is upwards. That’s why, when it comes to a Junior ISA, it’s a no brainer to go for a stocks and shares ISA over a cash ISA.

Moneyfarm predicts that over the next ten years, those investing in developed equity markets will see 8.3% return per year, while emerging market equity investors could see 6.6% returns per year. And longer term is likely to see more of the same, whatever temporary blips come and go.

Historical data looking at the performance of a 60/40 balanced portfolio from 1930 to 2022 shows there were a total of 71 positive years for stocks and shares, versus 21 negative years. So if you are in a position to ‘invest and forget’ (at least in the short term!), the beneficiary of that Junior ISA will reap the rewards.

To show our confidence in this strategy – and to reward you for your generosity to the next generation – we would like to offer you up to £750 right now! Any deposits you make up until 30 April 2023 will count towards your total cashback reward, but remember, you have until 5 April to make the most of your ISA/JISA allowance for the current tax year.

There are more details here.
With investing your capital is at risk.

We are always happy to chat about any aspect of your investments. Please feel free to call
us any time.