Parents could give their children a pot of more than £15,000 when they turn 18 from investing as little as £25 a month into their Junior ISA (JISA), research from Moneyfarm shows.
First launched in 2011, JISAs let parents, grandparents and other family members save or invest up to £9,000 a year on a child's behalf in a tax-efficient wrapper.
A Junior ISA opened at birth and largely left alone can turn £25 a month from birth to as much as £15,014 by a child's 18th birthday, or to around £7,000 at the lower end, depending on the rate of investment growth achieved, according to Moneyfarm.
JISA growth over time: £25 a month at 3%, 5%, 7%, and 10% annual growth
Source: Moneyfarm
Chris Rudden, head of investment consultants at the firm, said: “When it comes to investing for your children's future, time is often far more valuable than the amount you save for them. The earlier you begin, the longer compounding has to work, meaning your investment can generate returns of its own over many years.”
Unlike most adults, who start investing seriously for retirement around their 40s and so have a 20 to 25-year horizon, a child's money can compound for close to two decades before it is ever touched.
“Parents don't need a huge surplus of cash to make a meaningful difference,” Rudden said. “Regular, affordable contributions made consistently over a long period can add up significantly and help create a strong financial foundation for a child's future.”
“A child's greatest financial advantage isn't necessarily how much money their family can put in today, but the number of years ahead of them. Starting early gives that advantage the best chance to make a real difference in the future,” he concluded.