Portfolio Dilemma: should I invest differently for my children?

Firstly, I wouldn’t beat yourself up about not getting round to setting up a Junior ISA as there’s plenty other things that take your attention when children are young. However, there are benefits to opening an account as soon as practically possible – a longer investment horizon and with it greater scope to benefit from the power of compounding (a topic we discuss here).

As you have your own stocks and shares ISA, and clearly know your onions, you are better placed than those less familiar with investing.

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A large proportion, over a third of parents, subscribed to the cash version of the Junior ISA in the 2023-24 tax year. However, the risk with cash is inflation, which tends to erode its value over long time periods. According to Barclays’ Equity Gilt Study 2025, UK stocks have on average returned 2.9% a year in real, inflation-adjusted, terms over 20 years. In contrast, cash has lost 1.8%. The same study has found the probability of UK shares outperforming cash over 10-year periods is 91%.

With a near two-decade time period, parents have plenty of time to ride out the short-term ups and downs that come with investing.

Global index funds and ETFs, such as Vanguard FTSE All-World ETF (LSE: VWRP), iShares Core MSCI World ETF (LSE: SWDA), and Fidelity Index World, are worthy contenders for a Junior ISA. As those funds invest in thousands of companies risk is being spread, although be mindful of the high weighting to the US, which is around 65% to 70%.

Given that so much is invested in the US and by extension there’s a large amount held in the world’s biggest technology companies, you could look to blend a global tracker fund with an actively-managed fund that is investing very differently. Among the options are Scottish Mortgage (LSE: SMT), Artemis Global Income, Blue Whale Growth and Ranmore Global Equity.  For the UK market options include City of London (LSE: CTY) and Fidelity Special Values (LSE: FSV).   

The long term timescale also provides the opportunity to consider more adventurous funds. Such funds typically provide a bumpier ride short term, but offer the possibility of higher rewards than lower risk funds over the long term.

Funds investing in emerging markets, such as Asia Pacific, specialising in smaller companies, or investing in a particular theme, such as technology, are considered adventurous funds. There are also single-country emerging market funds offering dedicated exposure to China, India, and Vietnam.

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What is a Junior ISA?

A Junior ISA, also known as a JISA, is a tax-free way to save or invest for your child or children’s future. You don’t pay Capital Gains Tax if the investment grows, and you also won’t pay tax on dividends or interest payments. Under the current rules, you can invest up to this amount each tax year. This is a separate allowance from an adult ISA, into which you can put this amount each tax year.

A Junior ISA can only be opened by a parent or a legal guardian but anyone can pay into it – such as grandparents. When the child turns 18, they can then access the money.

There are two types: the cash Junior ISA and the stocks and shares Junior ISA. Parents can open one of each, with the £9,000 limit each tax year applying across both.

Our Junior ISA is free to open when you hold an ISA or Trading Account on our Plus or Premium plans. 

When your child or children turn 18, they’re handed the keys to their Junior ISA, also known as a JISA. The Junior ISA converts into a full adult ISA, which comes with a higher ISA allowance each tax year under the current rules.

At this point they will have full access to the money in the ISA and, if they wish, can make withdrawals.

While parents have no control over what a child decides to do when they can access the Junior ISA at 18, it could be a good idea to sit down with them and discuss their options. The best option for them could depend on the size of their pot, but they should also be encouraged to think about their broader financial circumstances, what the next few years are likely to have in store, and what their longer-term goals are, such as getting on the property ladder.