How the whole family can make financial milestones a reality

Tax-efficient investing strategies can give families options and flexibility, solving problems for one generation and finding solutions for another.

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New research* from interactive investor, the UK’s leading flat-fee investment platform,found that families are increasingly trying to help each other financially, with inflationary pressures and the cost-of-living continuing to bite. When thinking about supporting the next generation financially, almost half (48%) will weigh up savings options for their children (such as Junior ISAs), and 38% look at tax considerations when passing on money.

For younger generations, achieving key financial milestones may not be possible without support from older family members. The student loan saga is another recent high-profile example of the financial burdens young people are grappling with, alongside the challenges associated with buying a first home and saving for a comfortable retirement. It is therefore unsurprising that many families are stepping in to lend a helping hand, with an increasing amount of UK adults saying they are giving living inheritances according to ii’s Great British Retirement Survey.

Major life events – whether that’s a property purchase, a wedding, or funding university – can come with equally major price tags.

Below, interactive investor experts outline how families can use savvy investment strategies to make more of these goals a reality.

The power of starting early

Camilla Esmund, senior manager at interactive investor says: “The biggest advantage families have when it comes to building a financial nest egg for their little ones is time. Investing small or modest amounts from a child’s early years allows compounding to do the heavy lifting.

“A Junior ISA (JISA) can be a brilliant tool for doing this, as it gives that money a chance to grow without being eroded by tax. You can invest up to £9,000 annually into a JISA from birth until age 18, which over the years can amount to a substantial sum - reducing the financial burden for your offspring down the line.”

The financial hurdle of higher education

The cost of higher education has become a significant hurdle for many young people and their families, with the plight of students with mounting debt swarming headlines.

Esmund explains: “Many university leavers, who already face a range of competing financial challenges once they go out into the world, now have the additional stress of ongoing repayments that barely make a dent in their outstanding debt. Worryingly, many have seen their loans grow since finishing university, threatening to cast an early shadow over their financial lives.

“These loan repayments can equate to chunky sums out of young workers’ pay-packets each month; money that could be going into a tax-wrapper like a pension or an Individual Savings Account (ISA), compounding for them and their future. 

“Again, this is where planning ahead and investing in a vehicle such as a JISA as early as possible can build a strong financial footing for your child before university, potentially offsetting that debt.

“Plus, if at 18 they decide not to go to university, they’ll still have that pot to use towards other financial goals such as buying their first home. Ultimately, starting early and staying disciplined with investing can give you and your loved ones more options once children enter adulthood.”

How Junior ISA (JISA) contributions can compound over 18 years

• The average student loan is currently £53,000 but it could rise to a staggering£75,697 in 18 years, assuming 2% inflation
• Investing £220 per month into a JISA could provide over £75,000 by age 18, assuming 5% growth after fees
• The table below illustrates how regular contributions can add-up over time, helping to reduce potential student debt in the future.

Note: these figures are for illustrative purposes.

Source: interactive investor.

An opportunity to engage the whole family in investing

Esmund says: “Understandably, juggling other financial costs as a parent can make the prospect of regular JISA contributions seem unachievable and daunting. Getting more of the family involved, such as grandparents, can be a great way to stay consistent with JISA contributions and spread the costs.

“Although it is only parents or guardians that can open the JISA, other family members can pay into it – for example, for Christmas or birthdays. It’s important to note, however, that the contributions from everyone must not exceed the £9,000 per child per cap.”

With interactive investor’s Plus Plan, investors can open Junior ISAs for all of their children, as well as free accounts for up to five family members – all under one fixed subscription fee.

Esmund adds: “This family-led strategy is a great way to encourage open conversations about money and engage the whole family on investing. This is beneficial across all generations of the family, and it helps your children form a healthy relationship with their finances that will see them through their adult lives.

“For parents or guardians choosing how to invest a child’s JISA, it’s an opportunity to engage them on how it is invested, and why. This invites them to ask questions or express any interest in certain companies or areas of the market, making it a meaningful way to stoke their interest in investing early on. Not only can this help them better understand the value of investing over the long term, it’ll also be beneficial when they have access to that money at age 18 and can then confidently decide how it is used.”

Trimming your IHT bill

Older family members with surplus wealth can use financial gifts, such as paying into a JISA, to kill two birds with one stone.

Passing on wealth while you’re still alive is a great way for younger family members to receive financial support at the time they need it most and can also trim your inheritance tax bill.

However, there’s a catch because some gifts made within seven years of death are still counted as part of your estate for the inheritance tax calculation.

Fortunately, there are simple ways to make sure gifts won’t be caught in the IHT net, regardless of how long you live after making them.

Craig Rickman, personal finance expert at interactive investor, shares two ways that parents and grandparents can immediately protect JISA contributions from inheritance tax:

1) Use your annual gifting allowances

Rickman explains: “You can gift up to £3,000 each tax year and park it immediately outside your estate for inheritance tax and can bring forward the previous year’s £3,000 allowance if you didn’t use it. As individuals each get a separate £3,000 annual allowance, a couple could potentially channel £12,000 into younger family members’ JISAs by 5 April, and a further £6,000 in the new tax year, with no future risk of a tax charge.

“On top of the annual gifting allowance, you can make small gifts of £250 each tax year to multiple individuals - as long as you’ve not used a separate exemption on the same person - a handy rule to use if you’ve got lots of grandchildren.”

2) Make gifts out of surplus income rule

Rickman adds: “Making gifts out of surplus income is an extremely powerful way to pass on wealth tax-free, enabling you to swerve the seven-year rule by giving away money which is above your needs.

“For example, if you have regular income of £20,000 and only spend £15,000, you could pass on up to £5,000 each year. There are, however, some important rules to observe to avoid getting caught out down the line. The gifts must come from income and not capital, be regular in nature and not impact your standard of living, and you’ll need to keep stringent records to prove the income gifted was indeed surplus to your requirements.”

Methodology

*The research was conducted by Censuswide, among a nationally representative sample of 1,000 UK adults (Aged 18+) – of which 830 are parents - who hold investment products including S&S ISAs with a balance of at least £20,000. The data was collected between 16.01.2026 - 20.01.2026. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.