Is A Junior Isa Simply A Risky Timebomb?
I recently heard an excuse, as least that's what I'll call it
, for why a parent should not open a Junior ISA for their child and start putting away a regular amount to help create a nest egg for when their child reaches 18.
I strongly believe that saving at least a little on a regular basis using something like the children's ISA is a fantastic way of helping to provide a child with what will almost certainly be an essential pot to help them overcome the financial challenges and hurdles which will face them as they leave school and start establishing their own future.
Whether it's creating a college fund to help them pay their way through university, getting married or even getting their foot on the first rung of the property ladder, creating that lump sum can make a very real difference.
But in talking with a parent recently who hadn't yet opened a Junior ISA for their child, I was astonished when they explained that although they were financially in a position which would allow them to put aside a reasonable sum on a regular basis for their child's future, they were not prepared to do so.
Their reason? They explained that whilst their child was an adorable and loving little bundle of fun right now who considers that his parents to be the most entertaining and wonderful people in the entire universe, if that little bundle of fun grows up to become a drug addict, or fast car enthusiast, that hard earned investment could be rapidly wasted, potentially causing significant harm to the child in the process.
I suspect that there are other parents who have thought along similar lines, and to some extent I can't entirely blame them. After all, handing over 100,000 to an 18-year-old could potentially be considered something of a risk. Since the current annual limit on the amount of money which can be contributed towards the Junior ISA is 3600, over 18 years this could certainly create this sort of money.
Since it is also the case that every penny invested in a Children's ISA is completely inaccessible to everyone until the child reaches the age of 18, at which point the child alone is the only person able to access that sum of money, there is inevitably a degree of risk.
So the question really is whether that risk is significant enough or relevant enough to warrant the deliberate refusal to provide them with a financial kick-start in life.
I think there are two points I should make. First of all, I wonder whether this parent would decide not to send their child to school, but to home school them instead just in case they were bullied or got in with the wrong crowd. I wonder whether they would not support their child learning to drive in case one day they ended up being involved in an accident. I wonder whether they would choose not to allow them to eat nuts just in case they happened to choke on one, or climb a tree in case they fell out and broke a leg.
We cannot protect our children against the inevitable risks that they will face in life. Our role as parents is not to protect them against all risks, but to provide them with the ability to make choices which will allow them to identify those risks and make their own mind up about them. Denying them the opportunity is not protection.
The other point is that if you know your child is going to be able to benefit from a Junior ISA investment then there is no reason why you cannot help them to prepare for that. I believe that it's important to teach children the value of saving from an early age, and to respect money as soon as they are old enough to understand.
Whether you tell your child when they are fairly young about their Junior ISA, or you wait until much nearer the time when they will be able to benefit from it is up to you, but I do think that deciding not to open a children's ISA simply because the money might possibly be used to fund unwise pursuits is not a reason, but an excuse, and one which could have just as many negative impacts on your child's future.
by: Justin Arnold
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