Junior Isas can stop parents raiding the piggy bank

As people struggle in the current climate it can be tempting to raid savings to help make ends meet.

While this is fine, many parents are faced with the temptation of whether or not to withdraw money they had put aside of their children, with the promise that they will re-pay the money when they can afford it.

However, Kate Moore, head of savings and investments at Family Investments, said that investing in Junior Isas is a great way to remove the lure of raiding the piggy bank.

"Like the CTF, it provides the obvious benefit of tax efficient savings that are safely locked away until the child is 18 years old - at which point they will roll over into an adult Isa and the child can take over," she explained, adding that parents particularly value the 'locked in' feature.

However, before selecting a Junior Isa, parents need to think carefully about how much they can put aside each month, particularly if finances are likely to continue being squeezed.

"Some Junior Isa providers, particularly investment specialists, aren't likely to allow parents to pay any less than £50 per month. This might be fine for wealthier parents, but ordinary families need to choose carefully to find a product that is both affordable and will maximise the return on their contributions in the long term."

The comments follow figures from HM Revenue and Customs which revealed that of the 555,000 Child Trust Fund vouchers issued in the 12 months to June 2011, 136,000 are yet to be invested.

Child Trust Fund vouchers became available in 2002 but the government stopped issuing them to children born after January 2011.

Because of this, some industry experts are arguing that Child Trust Funds should be merged with Junior Isas, to ensure that those with the former are not subject to a limited range of expensive accounts.

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2012-01-12 12:42:02 © Moneyextra.com