Criticism of Junior ISAs is unfair
Guest blogger Simon Ellis of Legal & General Investments argues that Junior ISAs are being unfairly damned.
Junior ISAs (JISAs) have only been a part of the personal finance landscape for a relatively short period of time.But they've sparked a lot of talk already.
The concept is to create a smaller mirror image of the most successful savings product of the last 20 or so years- the Individual Savings Account. The limits for JISAs are lower than their adult parent version, but the tax treatment is the same, and so is their theoretic attraction.
Plenty of cynicism
After the misfiring Child Trust Fund regime, you would have thought product providers and financial advisers would have hailed a good quality replacement with loud cheers. Indeed, the industry has long whinged at the lack of new tax incentives for saving, and the failure to address lack of education or opportunities to engage with young people.
Advisers and press commentators have latched onto this simplistic moral theme: "Could you have been trusted with over £100,000 at that age?” The oft-quoted prediction then being they’ll blow it all on “drugs, booze, sex and fast cars.”
Good luck to them? Or a simple reflection of wishful thinking if we’d been in that situation?
Money and choices
Today’s children face a wall of tough decisions when they leave education. In spite of popular opinion, I sense most of them will have the mental and emotional wherewithal to cope.
The problem is will they have the money? Money doesn’t make them happy, but it will allow them to make better choices. I suspect parents, grandparents and godparents will seek to do what they can to stash some money away to ease the transition into adulthood.
But what about the children themselves? Our research asked the opinions of six-year-olds from up and down the country, with the results making for some insightful, if entertaining reading. Highlights included four in five (80%) thinking they will own a house before they are 25, while 53% think £10,000 is enough for their first house.
One in five are firm believers that money exists solely they can buy sweets, and frankly, who can blame them? You can see the highlights of the research in this video.
On reaching 18, this generation face a future of debt and a wall of financial challenges. A JISA will give them choices not challenges, funds not debts, an opportunity, not a worry. With a range of opportunities to fall further into debt at every step, we need to be doing everything we can to help our children have at least a fighting chance when it comes to managing their money.
Junior ISAs will not be right for everyone, but as a secure way of putting money aside during childhood, they take a lot of beating. The industry may need some time to fully believe in their merits but I am confident that more of today’s six year olds will be greeted with a JISA pot in 12 years’ time than you might think.
Simon Ellis is managing director of Legal & General Investments
What do you think? Have Junior ISAs been given a raw deal so far? Will you be opening one for your children? Let ua know your thoughts in the comment box below.
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