If building wealth for the next generation is one of your primary financial goals, then you ought to consider the various benefits that come with junior investing.
In this article, we’ll take you through what junior investing is and how you can use it to build wealth effectively for you and your family. Read on to find out more.
What is junior investing?
Junior investing is a specific type of financial approach where you invest in accounts that help grow your children’s savings.
These accounts can have various impacts on your children’s wealth, and if managed the right way, can help you build their wealth tax efficiently for the future.
There are two main types of junior investment accounts you can open – a Junior Individual Savings Account (JISA) and a Junior General Investment Account (Junior GIA).
JISAs allow you to grow your child’s savings each year whilst sheltering it from tax. The money in these accounts can be built up each year – according to the JISA allowance – and accessed when your child turns 18.
Junior GIAs allow you to invest money each year, except these accounts don’t have a limit on the amount you can contribute. However, it’s worth noting here that these accounts are susceptible to income and Capital Gains Tax (CGT), unlike JISAs.
To find out how to open a junior account, contact your wealth management firm for more guidance.
How can you build wealth effectively with junior investing?
There are many ways you can build wealth effectively using junior investment accounts, including things such as:
Investing with your future goals in mind
One of the most effective ways to build your wealth with junior investing is to make sure you’ve outlined your future goals to help direct your investments.
By establishing your financial goals in a plan, you’ll be able to structure contributions to your junior investment accounts more accurately, and align this with your overall financial situation.
For instance, you might want to grow your child’s savings so they have a lump sum to go towards their educational fees, or potentially to help them purchase their first property.
The more effectively you outline your goals, the easier it will be to implement achievable steps to stay on target with your accounts.
Exploring different junior accounts
You can also consider exploring different junior accounts to help optimise your investments.
Investing in one junior account alone can bring its benefits, but there are also advantages to investing in more than one.
For instance, you can invest in a cash JISA to grow your child’s savings tax-free each year. At the same time, you can open a stocks and shares JISA to benefit from not just savings, but investments in certain securities which may produce profit.
With your successful investments in this account, you won’t need to pay income or CGT on any growth you make.
This can further increase your tax-efficient wealth building and also help balance risk across different account types – i.e., not having all your eggs in one basket.
Obtaining financial advice
As with any type of investing, it can be highly important to obtain financial advice from a professional.
Your expert can help you adopt the right approach to your junior accounts so you both grow your child’s wealth effectively whilst also making contributions that align with your financial circumstances.
They can help you in your financial plan and also in your contributions each year to invest the right amounts at certain times that best suit your situation.
Also, as your situation evolves, you can receive ongoing advice to help you maintain a clear trajectory towards your goals for junior investing, no matter the changes that arise.
Now that you have the key to unlocking junior investing for the next generation, it’s worth speaking to your financial adviser about how to start building the right approach for you and your family’s wealth.
Please note that the value of your investments can go down as well as up.