Little-understood savings account could pay for your child's first home

A woman checks her finances
-Credit: (Image: Getty)

Parents and guardians have been urged to consider opening a Junior ISA for their children, as it could significantly boost their savings. Wealth firm True Potential suggests that if families max out a Junior ISA each year until the child turns 18, it could provide them with enough savings to buy a house and cover a three-year university course.

This is based on putting the maximum £9,000 a year into a stocks and shares ISA with a standard six percent growth, which would amount to £278,150.87 by the time the child turned 18. The average first-time house currently costs £249,000 while a three-year university course is £9,250 a year.

Neil Rayner, head of Advice at True Potential, said: "Starting early and establishing a routine of saving regularly, even in small amounts, can significantly benefit your child's long-term financial health. It's important to set realistic goals-whether it's helping them through university, buying their first car, or contributing to a house deposit. Our research shows that with wise investments, these goals are well within reach."

A couple check their finances
Parents and guardians have been urged to look at opening a Junior ISA -Credit:Getty

Even parents who can only afford modest savings deposits could see good returns over time, with an investment of £50 a month growing to £19,000 by the time the child turns 18. Despite the benefits of a Junior ISA, many people remain unaware of the account.

Research from the group found that only 27 percent of people have a good understanding of how ISAs work. Parents and guardians have control over the Junior ISA until the child reaches 18, at which point the funds are transferred to them. Other family members and friends can also contribute to the pot, helping to build up savings for the child.

One of the key benefits of an ISA is that it's entirely tax-free, with no tax due on any interest or investment growth, or on any income derived from the ISA.