Where to invest your children's Isa

·5-min read
MayKa0003047. The Daily Telegraph. Portrait of Oonagh Shiel and her three children Thomas, 16, Caitlin, 20 (brown hair) and Julia, 14, (red hair), photographed near their home in Muswell Hill, north London, for a Your Money case study on investing into ISAs for children. Saturday February 25, 2023. - Clara Molden
MayKa0003047. The Daily Telegraph. Portrait of Oonagh Shiel and her three children Thomas, 16, Caitlin, 20 (brown hair) and Julia, 14, (red hair), photographed near their home in Muswell Hill, north London, for a Your Money case study on investing into ISAs for children. Saturday February 25, 2023. - Clara Molden

Oonagh Shiel wants her three children to develop good financial habits from a young age. For years, she has been using Junior Isas to teach them to invest their money.

“I make it a point of education with my kids that I talk about my investments, and I try to get them to invest rather than just trying to save money that might lose value over time,” she says. “I also try to empower them to really think about money as a force for good, and how they can influence companies.”

Shiel, 47, a project manager from north London, has been putting money into their Jisas and guiding them to make choices about where to invest the funds.

Up to £9,000 a year can be put into a Junior Isa. As with adult versions, there are cash as well as stocks and shares options.
Putting in £100 a month from the time a child is born would generate a pot worth almost £35,500 by the time the child turns 18, assuming investment growth of 5pc a year after fees, according to AJ Bell.

Even putting away £20 a month would generate savings worth more than £7,000 during the same period. The full £9,000 a year would yield £266,000.

AJ Bell’s Laura Suter says those who want a more “hands-off” approach can opt for a low-cost one-stop-shop fund, such as Vanguard LifeStrategy, and choose options that align with the level of risk they want to take.

Another option is to pick a low-cost global tracker, like Fidelity Index World Fund, which invests in thousands of companies around the globe for a fee of 0.12pc a year and can be used as a building block for the portfolio. Riskier funds can then be added on top.

Your Money. Investing in Junior ISAs. John Jennings and his two year-old grandson Freddie at home in Colston Bassett, Nottinghamshire. - Andrew Fox
Your Money. Investing in Junior ISAs. John Jennings and his two year-old grandson Freddie at home in Colston Bassett, Nottinghamshire. - Andrew Fox

For Shiel and her family, the investment strategy that appeals most is to choose sustainable funds. “The kids don’t want to touch anything with oil,” she says. “They want clean, innovative funds.”

Caitlin, 21, is the eldest and is investing in health technology and preventative health, with stocks like GSK, the drugs giant, in her portfolio. She also chooses funds with a high sustainability rating as judged by Morningstar, an analyst.

“She’s got quite an adventurous approach to risk because she’s only 21,” says Shiel. Caitlin “won’t go near tobacco or arms” or anything that might harm any people or animals.

Shiel teaches her children that “time in the market is more important than trying to time the market”, so they take a long-term view of returns.

Her son Thomas, 16, is more focused on maximising his returns and is interested in “exchange-traded” funds – listed funds that offer cheap access to every conceivable market or sector. He is more interested in shares rather than bonds.

Shiel’s youngest child, Julia, 14, has pooled all of her money into sustainable funds and, like her big sister, worries about choosing something that could harm humans or animals.

Other parents and grandparents pick the Isa investments on behalf of their children and grandchildren.

John Jennings, 63, opened a Junior Isa on his grandson Freddie’s first birthday. He says he picks the same investments as he would for his own portfolio. He aims to invest £500 a year into Freddie’s Jisa.

He has picked funds that have high sustainability ratings (he works in the sector), low fees and a good track record.

“When I’m pushing up the daisies he can say ‘well, my granddad did try and save money for me in things that were into renewable energy and reducing carbon footprint,’” he says.

How has the performance been so far? He invested in November 2021 and the funds had a “fairly ropey time of it” in 2022, Jennings says, so young Freddie is sitting on a loss at the moment.

But he takes a long-term view. “It’s a marathon, not a sprint,” he says.

David Mitchell, 76, is focusing on maximising the returns in the Jisas he set up for his five-year-old granddaughter and 15-year-old grandson.

Mitchell, from East Sussex, sees Jisas as a way of passing wealth on to his grandchildren which will not be subject to inheritance tax.

MayKa0003046. David Mitchell in Sussex Saturday February 25, 2023. Picture by Christopher Pledger for the Telegraph. - Christopher Pledger
MayKa0003046. David Mitchell in Sussex Saturday February 25, 2023. Picture by Christopher Pledger for the Telegraph. - Christopher Pledger

All of the money is invested in funds: 3i Infrastructure, Fidelity Special Values, the Manchester and London Investment Trust, Polar Capital Technology and AJ Bell’s Global Growth Fund.

“They’re all long-term investments,” he says. “It’s a reasonable spread of assets and hopefully they will grow over time.”
Mitchell, who is retired, has been putting at least £1,000 a year into the accounts and reinvests the dividends.

“I’ve invested long enough to realise that ‘get rich slowly’ is the only sensible aim,” he says. “I’m looking to get an overall return around 7pc a year. You’re got good years and some years are not so good overall, but if you can maintain that you know you’re heading in the right direction.”