Cash accounts may give parents some certainty over the returns their child will be getting, but Coles says parents could risk missing out on the potential long-term growth available from investing.
Some parents may want to keep the money in a savings or current account under their own name, to keep it out of reach of the child.
Anyone, including parents and grandparents, can pay money into a Junior Isa, but the total amount paid in cannot go over £9,000 in the 2024-25 tax year.
But Coles says that, given children won’t be accessing a pension until they’re at least aged 50 and over: “It means this is only the right home for money they won’t need as they go through their working life.”.
Sarah Coles, head of personal finance, Hargreaves Lansdown, says children can also benefit from savings rates which are often more generous than their adult equivalent.
