How parents could double savings for their child with ISA trick

Parents could help potentially boost their savings for their child by making an account switch
Parents could help potentially boost their savings for their child by making an account switch -Credit:Getty

Parents saving up in an ISA for their child could potentially double their money by making a switch, according to reports.

Those with money in a Junior ISA can cash in with a move to another account when their child turns 18. And the money-switch could even help buy their first home, reports The Mirror.

Up to £9,000 can be saved into a Junior ISA each tax year, with interest added to the savings. New calculations for the Mail on Sunday show that those whose parents put away just £100 a month into a Junior ISA since their birth would have around £35,000 by the time they turned 18.

When a child turns 18, the Junior ISA becomes a regular ISA - but those who open and move the savings into a Lifetime ISA could then more than double the original worth. Up to £4,000 can be saved every tax year into a Lifetime ISA, with the Government then adding a bonus of up to £1,000 a year.

The Mail on Sunday estimates that it would take until the child turns 28 for the entire contents of the original Junior ISA to be moved across to the Lifetime ISA. If the yearly Government bonus and interest into account is taken, it is estimated that the original savings then would be worth £75,000.

If someone is able to save the full £9,000 each year into a Junior ISA, it is estimated that the total savings would be £273,000 by the time the child turns 18. If the same process is followed, by moving the money into a Lifetime ISA, the Junior ISA would be worth £376,097 by the time they turn 27, and the Lifetime ISA would be worth £65,848.

This makes combined savings of nearly £442,000. This assumes 5% investment growth per year, but no extra money added to the nest egg after the child turns 18.

And these savings would be enough to buy a home outright in most of the UK, with the average house price currently at £285,000.

Jason Hollands, of investment group and ISA provider Bestinvest which compiled the figures, said: “Such a strategy could potentially help them own their own pad in their early to mid-twenties, when many young people are typically stuck in the trap of rental accommodation.”