How to choose the best JISA for your child

As September rolls in and the children go back to school, it’s a good time to reflect on what, other than education, can be the best things for setting them up for the best future possible. For parents, grandparents, or guardians looking to give children a financial head start, the Junior ISA (JISA) is one of the most powerful tools available in the UK today. 

Introduced in 2011 as the successor to the Child Trust Fund, the JISA allows families to save or invest up to £9,000 per year (2025/26 allowance) in a tax-efficient wrapper. The money grows free of income tax and capital gains tax, and when the child turns 18, it automatically converts into an adult ISA that they can access or continue to grow.

The core benefits of a Junior ISA

Before comparing the two main types, it’s worth highlighting the key benefits that apply to all JISAs.

• Tax-Free Growth: All interest, dividends, and capital gains earned within a JISA are completely tax-free. Over 18 years, this can add up to thousands of pounds in saved taxes. This is on top of an adult’s ISA allowance – so it’s a perfect way to protect more of your family’s wealth against tax.

• Generous Annual Allowance: Families can contribute up to £9,000 per child, per year. For those who can afford to use the full allowance, that’s £162,000 saved over 18 years – before growth is even factored in. But no amount is too small: in fact small amounts, regularly and early, can still help to put your child on the best track possible to hit adulthood. Remember, it’s not just the parents who can contribute, grandparents (and anyone else for that matter) are able to contribute to your child’s future. For those lucky enough to have plenty of savings, if you combine both parents and a child’s allowance, you can shelter £49,000 per year, with extra increments for each child. With increasing taxes on wealth and more difficulty in passing wealth to the next generation, the Junior ISA is a great vehicle for parents, guardians or grandparents.

• Locked Away Until 18: Unlike ordinary savings accounts, the money in a JISA cannot be withdrawn until the child turns 18. While this might feel restrictive, it’s actually a benefit: it ensures the pot is preserved for the child’s future, whether that’s higher education, a first car, or a deposit for a home – giving them the perfect headstart in life.

• Flexibility at 18: At adulthood, the JISA converts into an adult ISA automatically. The child can either keep the money invested tax-free, or use it towards immediate needs.

Why stocks and shares JISAs have the edge

On the surface, the choice seems simple: you can open a Cash JISA, which works much like a tax-free savings account, or a Stocks and Shares JISA, which invests in equities, bonds, funds, or other assets. But which is best for your child’s long-term future? 

While both types of JISAs carry clear advantages, the case for Stocks and Shares JISAs becomes particularly compelling when you take a long-term perspective:

Harnessing the power of compounding

Investing in Stocks and Shares JISAs allows money to benefit from the twin engines of growth and compounding. Historically, investments have shown that over long periods, they can outperform cash savings, particularly for those that have time to ride out the ups and downs of financial markets. Whilst past performance isn’t always an indicator of future performance, investing in a well diversified portfolio can help to boost your child’s start to adulthood.

For example, £10,000 in a Cash JISA growing at 3% per year becomes about £17,000 after 18 years, whereas £10,000 in a Stocks and Shares JISA growing at 6% per year becomes about £28,600 after 18 years.

Investing comes with risk, markets go up as well as down. The benefits of investing have been shown to be best experienced over the long term.

Protection against inflation

Cash is vulnerable to inflation. Even if a Cash JISA offers 3-4% interest, if inflation is running at 4-5% the child’s savings are losing value in real terms.

By contrast, equities represent ownership in companies, many of which can raise prices in line with inflation. This means they often preserve, and even grow, their real value over time.

Time horizon works in your favour

A JISA is locked away until age 18, which is a long-term time frame. Stock markets are volatile in the short run, but over periods of even 7+ years the probability of achieving positive returns rises dramatically.

Parents investing for a toddler, for example, can afford to ride out market cycles. Short-term dips matter less when the investment horizon is nearly two decades. 

Also, stocks and shares JISAs can be different risk levels, some with more investments into safer investments such as bonds and others with more exposure to stock market investments – with a whole mix in the middle. You can adjust the risk of a Stocks and Shares JISA as your child gets closer to their 18th birthday.

Building financial education

There’s also a softer benefit: opening a Stocks and Shares JISA can be a great way to teach children about investing. Parents can show them how markets rise and fall, explain the concept of dividends, and instil good financial habits.

Cash vs Stocks and Shares JISA – looking at an example

To illustrate the impact of compounding over 18 years, let’s imagine a parent contributes £50 per month (that’s £600 a year) from the day their child is born until they turn 18.

We’ll assume:

• Cash JISA grows at 3% per year (optimistic for cash savings over the long term).
• Stocks and Shares JISA grows at a conservative 6% per year (broadly in line with long-term stock market averages).

That’s a difference of over £5,500, simply by choosing to invest rather than save in cash.

Now imagine if a family were able to contribute £200 per month (£2,400 per year):

The difference here is more than £22,000, enough for a deposit on a first home or to cover a large chunk of university costs.

A balanced approach: blending cash and stocks

The decision doesn’t have to be either/or. Many providers allow you to split contributions between a Cash JISA and a Stocks and Shares JISA, provided the total annual allowance isn’t exceeded.

This can be useful for families who want:

• Safety net + growth potential: keeping some funds in cash provides security, while investing the rest allows for growth.
  
• Age-based strategy: younger children might have a higher proportion in stocks, shifting towards cash as they approach 18.

However, one thing to be conscious of, is that you can only have one of each type of JISA per child. So one Stocks and Shares JISA and one Cash JISA, but not two of the same type.

So, which one should I choose?

Junior ISAs are one of the most effective ways to give children a financial springboard. Both Cash and Stocks and Shares JISAs offer valuable tax-free growth and the discipline of locked-in savings.

However, when considering the long-time horizon, the threat of inflation, and the potential for compounding growth, the argument leans strongly in favour of Stocks and Shares JISAs. While Cash JISAs offer safety and predictability, their returns are unlikely to deliver the same wealth-building power.

For parents willing to embrace some investment risk, starting a Stocks and Shares JISA early could transform modest contributions into a meaningful nest egg. It’s not just about building savings, it’s about giving the next generation the best possible financial start in life.

We offer low cost managed Junior ISAs within our Wealth offering, each portfolio expertly managed by our investment team in the same way as our ISAs and Pension portfolios. For more details, you can go to our website or speak to our team.