The majority of young people with a Junior ISA prefer to keep investing once their accounts mature rather than splurge the cash, new data from AJ Bell has shown.
The investment platform said a third (33.1%) of Junior ISA holders contributed to their adult ISAs after the accounts matured.
This compares with fewer than one in 10 (8.9%) Junior ISA holders who withdrew more than half of their savings pot within a year of taking control of it and just 6.5% who chose to empty their whole pot within the first year.
Laura Suter, director of personal finance at AJ Bell, said: “One of parents’ biggest worries when opening a Junior ISA for their child is that when their child turns 18 they get control of the account, and can do what they want with it – including spending it all. But it’s actually far more common for young investors to continue to contribute to their ISA than blow their Junior ISA savings.
“Junior ISAs are one of the best tools for parents hoping to set their children up for later life through long-term investing, but the prospect of gifting children a large sum of money when they turn 18 can be daunting.
“This data proves that these concerns shouldn’t deter parents and grandparents from sticking a bit of money aside for their kids or grandkids. Even investing a small amount regularly, or a one-off modest lump sum when the child is young, could see that money flourish over the years.”
According to AJ Bell, putting away £500 a year for a child from birth could see them turn 18 with a portfolio worth almost £15,000, based on a 5% annual investment return including charges.
Equally, if a parent makes a one-off lump sum investment of £1,000 in a Junior ISA when a child is born, it could more than double in 18 years.
“The key thing for parents thinking of investing for their children to remember is that the sooner they start, the better, even if they can only afford a small amount of money. Grandparents, friends and family could also get involved and send money to a child’s Junior ISA up to the £9,000 annual allowance, meaning it doesn’t have to be seen as a solo project for parents,” Suter added.
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