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What is a Junior ISA? A guide to JISAs
A Junior Individual Savings Account (Junior ISA or JISA) is a tax-free savings account for children under 18 who live in the UK
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Best ways to save money for your kids in 2026
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Please note that the following information is for educational purposes only and is not financial advice. You may wish to consider obtaining professional advice if applicable.
Why start saving for your children early?
Time is one of the biggest advantages when saving for children. A child born today has up to 18 years for money to grow before they might need it for university, a first car, or a house deposit.
Compound growth rewards patience. If you saved £50 a month from birth in an account earning 5% a year, you would have circa £17,400 by your child’s 18th birthday. Approximately £6,600 of that total would come from growth alone. The earlier you start, the more of the work compounding does for you.
These figures are for illustration only and assume a constant 5% annual return, which is not guaranteed. Actual returns will vary and could be lower.
Starting early also spreads the cost. Saving £100 per month for 18 years is far more manageable than trying to find a £20,000 lump sum when your child turns 17.
That said, the value of investments can fall as well as rise. Cash savings are protected by the Financial Services Compensation Scheme up to £120,000 per person, per institution. For investments in a Stocks and Shares Junior ISA or Junior SIPP, you may be eligible for FSCS investment protection, which is capped at £85,000 per person, and applies only if there is a shortfall in client money or assets after the application of the CASS rules. View our client funds page for further details.
How much should you save for your child?
There is no single right answer to this, but depositing consistently is important.
A parent putting away £25 per month is building a meaningful pot over time. Assuming an illustrative 5% annual return (not guaranteed), that amounts to roughly £8,700 over 18 years. Someone contributing £200 a month could see around £69,600 over the same period.
Think about what you are saving for. A driving licence and first car might cost £3,000 to £5,000. A three-year university degree could require £30,000 or more in living costs alone. A deposit on a first home in England averaged around £34,500 in 2025. Your target shapes your strategy.
If money is tight, start small. You can increase contributions later as your income grows. The important thing is to begin.
Children’s savings accounts explained
A children’s savings account is the simplest way to start. These are standard bank or building society accounts held in your child’s name, and they come in three main types.
Easy-Access savings accounts
These let you deposit and withdraw money freely. They suit families who want flexibility and might need the money back in an emergency. Rates vary, but some children’s easy-access accounts pay over 5%. The trade-off is that rates can drop without notice.
Regular saver accounts
Regular savers reward monthly deposits with higher interest rates, sometimes exceeding 5%. They typically cap contributions at £100 to £300 per month and require you to pay in every month for a fixed term, usually 12 months. They suit parents who want a disciplined saving habit.
Fixed-Rate bonds for children
Fixed-rate bonds lock your money away for one to five years in exchange for a guaranteed rate. They work well if you know you will not need the cash during the term. The risk is that better rates may appear while your money is tied up.
Cash in these accounts is protected by the FSCS up to £120,000 per child, per banking group. However, interest earned is subject to tax rules explained later in this guide.
Junior ISAs: the tax-free option
A Junior ISA (JISA) is one of the most popular ways to save for children in the UK, and for good reason. All growth, whether interest or investment returns, is completely free from income tax and capital gains tax.
The annual JISA allowance is currently £9,000 per child. You can split this between a cash Junior ISA and a Stocks and Shares Junior ISA, but a child can hold only one of each type. The money is locked away until the child turns 18, at which point the account converts into an adult ISA in their name.
Only a parent or legal guardian can open a Junior ISA. However, anyone — grandparents, aunts, uncles, family friends — can contribute to it once it is open.
Junior Cash ISA
A Junior Cash ISA works like a savings account, but the interest is tax-free. The NS&I Junior ISA currently pays 3.55%, while some building societies offer rates above 3.8%. Capital is secure, and it suits parents who are uncomfortable with investment risk.
The downside is that cash returns may not keep pace with inflation over 18 years. If prices rise faster than your interest rate, the money loses purchasing power in real terms.
Junior Stocks and Shares ISA
A Junior Stocks and Shares ISA invests your contributions in funds, shares or bonds. Over the long term, equities have historically outperformed cash savings, though past performance is not a guide to future performance. Capital is at risk, and the value of investments can fall below what you originally put in.
With a time horizon of 10–18 years, some investors may consider investment-based options, though there are no guarantees of outperformance and values can fall significantly in the short term.
JISA allowance and rules
Key JISA rules for the current tax year: the annual limit is £9,000 per child, unused allowance cannot be carried forward, the child must be under 18 and a UK resident, and a child cannot hold both a JISA and a Child Trust Fund at the same time (one must be transferred into the other). Tax rules can change, and benefits depend on individual circumstances.
Junior SIPP: saving for your child’s retirement
A Junior SIPP is a pension for children. It is a much longer-term commitment than a JISA because the money cannot normally be accessed until the child reaches retirement age, currently 55 but rising to 57 from 2028. Pension rules can change further.
Tax relief on Junior SIPP contributions
The standout benefit is government tax relief. You can contribute up to £2,880 net per year, and the government adds 20% tax relief, topping it up to £3,600 gross. This applies even though the child has no earnings. Investments within the SIPP grow free of income tax and capital gains tax.
A parent contributing £2,880 every year from birth could, assuming an illustrative 5% annual growth (which is not guaranteed), build a pot of roughly £92,000 by the child’s 18th birthday. If left untouched until age 67, this could notionally grow to over £630,000, though actual investment returns may be significantly higher or lower. The value of investments can fall as well as rise, and your child may get back less than was invested.
These figures are illustrative only and are not guaranteed. Investment values can fall as well as rise.
When can your child access a Junior SIPP?
The child takes control of the account at 18, but cannot withdraw funds until they reach the minimum pension age. For many parents, this long lock-in is either a strength (the money is untouchable) or a dealbreaker (the child cannot use it for university or a house deposit). Consider your priorities carefully.
Using trusts to save for children
Trusts offer more flexibility than JISAs or SIPPs, particularly for grandparents and higher earners who want some control over how and when the money is used.
Bare trusts
In a bare trust, a named beneficiary (the child) has an absolute right to the capital and income once they reach 18. Until then, the trustee (usually a parent or grandparent) manages the assets.
For tax purposes, income and gains are treated as belonging to the child. This means the child’s personal allowance (currently £12,570) and other tax-free bands can apply, which is useful when a grandparent is the one making the gift. The £100 parental income rule still applies if the parent is the settlor.
For inheritance tax (IHT), gifts into a bare trust are treated as potentially exempt transfers. If the person making the gift survives seven years, the gift falls outside their estate entirely.
Discretionary trusts
A discretionary trust gives the trustees power to decide which beneficiaries receive money, how much and when. This suits families who want to prevent a child from accessing a large sum at 18.
The trade-off is higher tax. Gifts into a discretionary trust above the nil-rate band (£325,000) trigger an immediate 20% lifetime charge. The trust also faces periodic charges of up to 6% every 10 years. Professional advice is essential before setting one up.
Inheritance tax implications
For those concerned about inheritance tax, saving for children can serve a dual purpose. The IHT nil-rate band remains at £325,000 per person, frozen until at least April 2031. The residence nil-rate band adds up to £175,000 if you leave your home to direct descendants, giving a combined individual threshold of £500,000 or up to £1,000,000 for a married couple.
Gifts to children, whether into a JISA, Junior SIPP or bare trust, count as potentially exempt transfers. Survive seven years and the gift escapes IHT. The annual exemption of £3,000 per person (plus small gifts of £250) can also be used each year without triggering any IHT liability. Regular payments from surplus income, such as monthly JISA contributions, may also be exempt if they do not reduce your standard of living.
Tax treatment depends on individual circumstances and may change. Seek professional advice for estate planning.
Premium bonds for children
Premium Bonds are a government-backed savings product from NS&I. Rather than paying interest, each £1 bond is entered into a monthly prize draw with tax-free prizes ranging from £25 to £1m.
Anyone aged 16 or over can buy Premium Bonds for a child under 16, from a minimum of £25 up to £50,000 in total. A parent or guardian manages the bonds until the child turns 16. The prize fund rate is 3.6%, dropping to 3.3% from the April 2026 draw, with odds of 23,000 to 1 per £1 bond.
Premium Bonds carry no risk to capital and have a 100% government guarantee with no upper limit. However, there is no guaranteed return. A saver with average luck will typically earn less than the headline prize fund rate. For long-term children’s savings, a JISA may offer better growth potential, though it comes with different risks depending on the type chosen.
Child trust funds: What to do if your child has one
Child Trust Funds (CTFs) were available for children born between 1 September 2002 and 2 January 2011. The government made an initial deposit, and parents could top up to £9,000 a year.
No new CTFs can be opened, but existing ones continue to grow. You can still contribute up to £9,000 per year. Alternatively, you can transfer the full balance into a Junior ISA. A child cannot hold both at the same time. Transferring often makes sense because JISAs tend to offer a wider choice of providers and lower charges.
If you suspect your child has a lost or forgotten CTF, you can trace it using the GOV.UK online tool.
Tax rules when saving for your children
The £100 parental income rule
This is the rule that catches many parents off guard. If money gifted by a parent earns more than £100 in interest per year in a non-ISA account, the entire interest amount is taxed as the parent’s income, not just the amount above £100. This applies per parent, per child.
With children’s easy-access accounts paying around 5%, it takes only about £2,000 in savings before this rule bites. The simplest way around it is to use a Junior ISA, where all interest and gains are tax-free regardless of who contributed.
This rule does not apply to gifts from grandparents, aunts, uncles or family friends. Their contributions can sit in a standard savings account and the interest is taxed as the child’s income.
Children’s personal allowance and PSA
Children have the same personal allowance as adults: currently £12,570. They also qualify for the starting rate for savings (up to £5,000 at 0%) and a £1,000 personal savings allowance if they are a basic-rate taxpayer. Combined, a child with no other income could theoretically earn up to £18,570 in savings interest before paying any tax.
In practice, few children come close to these thresholds. But for those with substantial trust income or large inheritances, it is worth monitoring.
Comparing your options: which account is best?
Account Type | Annual Limit | Tax Treatment | Access Age | Who Can Open | Risk Level | FSCS Protection |
|---|---|---|---|---|---|---|
Children’s Savings | No fixed limit | Interest taxed (£100 parental rule applies) | Anytime | Parent/guardian | None (cash)* | Yes, up to £120,000 |
Junior Cash ISA | £9,000 | Tax-free | 18 | Parent/guardian | None (cash)* | Yes, up to £120,000 |
Junior S&S ISA | £9,000 | Tax-free | 18 | Parent/guardian | Medium-High (investments) | Up to £85,000 (Provider failure) |
Junior SIPP | £3,600 (gross) | Tax-free growth, 20% relief on contributions | 55 (57 from 2028) | Parent/guardian | Medium-High (investments) | Up to £85,000 (Provider failure) |
Premium Bonds | £50,000 | Tax-free prizes | 16 (managed by parent until then) | Anyone 16+ for a child | None (capital guaranteed) | 100% (HM Treasury) |
Bare Trust | No fixed limit | Child’s tax rates apply (£100 rule for parents) | 18 | Anyone | Varies | Depends on asset type |
Discretionary Trust | No fixed limit | Trust tax rates (up to 45%) | Trustees decide | Anyone | Varies | Depends on asset type |
*Cash savings are capital-secure but may lose value in real terms due to inflation.
There is no single best account. It depends on your goals, time horizon and risk tolerance. Many families use a combination: a JISA for medium-term goals like university, a Junior SIPP for a retirement head-start and a savings account or Premium Bonds for accessible emergency money.
Capital is at risk with any investment-based product. Past performance is not a guide to future returns.
How grandparents and family members can contribute
Grandparents are often keen to help but unsure of the rules. The key points are straightforward.
A grandparent cannot open a Junior ISA. Only a parent or legal guardian can do that. However, once the account exists, a grandparent can contribute as much as they like up to the £9,000 annual JISA limit. The same applies to Junior SIPPs: anyone can contribute, but a parent or guardian must open the account.
The £100 parental income rule does not apply to grandparent gifts. This means money from grandparents can sit in a standard children’s savings account without triggering extra tax for the parents. This is a significant advantage for families where the JISA allowance is already used up.
For inheritance tax planning, regular contributions from a grandparent’s surplus income, such as monthly standing orders into a grandchild’s JISA, may qualify as exempt transfers under the “normal expenditure out of income” rule. Keep clear records of income, expenditure and gifts to support any future HMRC enquiry.
Grandparents can also buy Premium Bonds directly for a grandchild, or consider a bare trust if they want to give larger sums while potentially reducing their estate for IHT purposes.
Teaching children about money and saving habits
Opening an account is only half the job. Teaching your child to understand money gives them skills that last a lifetime.
Start with age-appropriate conversations. A five-year-old child can grasp the idea of saving coins in a jar for something they want. By age 10, most children can understand that money in a bank earns interest. Teenagers can begin learning about budgeting, inflation and the basics of investing.
Practical steps help more than lectures. Give children a small, regular amount and let them make spending decisions. Show them their Junior ISA statement once a year so they see how the balance grows. If they receive birthday money, involve them in deciding how much to spend and how much to save.
Several free resources can help. The Money and Pensions Service offers lesson plans and tools through its MoneyHelper website. Young Money (formerly pfeg) provides classroom resources that parents can use at home.
The goal is not to create a miniature accountant. It is to build the habit of thinking before spending and understanding that small, regular saving adds up.