Image source: Getty Images
We all want the best for our children. And in a practical sense, that often means financial freedom and wealth. One way to achieve this is through a Stocks and Shares ISA, which can be started as a Junior ISA from the moment they are born.
The process is straightforward — most providers allow parents or guardians to set one up online in just a few minutes. Once opened, the account belongs to the child, but only they can access the money when they turn 18, ensuring it is preserved for their future.
What makes a Junior ISA particularly effective is the opportunity to build wealth through consistent contributions. Even small amounts saved monthly can add up over time, especially when invested in stocks and shares. The long time horizon works in favour of the child, allowing the ups and downs of markets to smooth out while the overall trend of growth takes hold.
Crucially, the power of compounding magnifies these contributions. When returns are reinvested, they begin generating further returns of their own, creating exponential growth. Starting early maximises this effect, turning modest, regular savings into a significant financial foundation by adulthood. It’s a simple, disciplined approach with lasting rewards.
Running the maths
So let’s imagine a family contribute £250 monthly to a child’s Junior ISA, and then the child continues to contribute that amount when they turn 18. Well, assuming a very achievable average 8% return, that £250 a month could be worth £372,000 by the age of 30.
Of course, there are different levers to pull here too. Some investors would be able to beat an 8% annualised return. At 10% annualised growth, that end figure would be £565,000.
And naturally, larger contributions would help fuel the fire of growth. The maximum contribution allowance for a Junior ISA is £9,000, and the current maximum contribution for an adult Stocks and Shares ISA is £20,000. As such, the £250 used in the above example leaves plenty of room for raising the contributions.
Where to invest?
I prefer to invest in one or two stocks a month as part of an ISA strategy — I do things a little differently in a SIPP. One stock I continue to like is Jet2 (LSE:JET2), the UK’s No 1 tour operator.
The company’s share recently sank after announcing that earnings would likely come in at the lower end of its forecasts. One of the reasons behind this is an increasingly late booking pattern, which reduces Jet2’s ability to plan and organise assets according to demand.
Noting “a less certain consumer environment“, the airline said it would be cutting seats on sale from 5.8m to 5.6m for the winter season. This is still an increase of 9% on last winter.
While some analysts will point to relatively thin operating margins, as well as pressures from the government’s budget, I still believe this is a strong business. The balance sheet is fortress-like and it actually trades on low cash-adjusted multiples. All in all, I definitely believe the stock is worth considering.
