MoneyWeek- Junior ISA story

I originally opened Child Trust Funds for my two sons and subsequently converted them to Junior ISAs. They have been with Orbis Investments for the last nine years.

I stopped paying into them partly because I had to prioritise funds to pay for rapidly rising school fees, but also because I became concerned that it would be a lot of money for my sons to have direct control of from the age of 18.

The returns have been good (averaging 10% p.a.) and the fees low, so they have accumulated a reasonable pot which I hope they won't be tempted to spend, now that my eldest is 16. Overall, I think people who invest in Junior ISAs should take a long-term view and invest in a stocks and shares ISA, because of the better long-term returns that it offers.

A lot of parents want to put money aside for their kids for their future. Putting money into a bank account or Cash ISA for 18 years is a waste of time. Over the long term the interest is likely to be poor and will just get eroded by inflation. A much better solution is to invest in the great businesses of the world. Over the long term these are likely to far outperform inflation.

Your child cannot access the money until they are 18 at which point it becomes a normal ISA. We are finding now that there are families where we set up JISAs 10 years ago and the children are now turning 18. We have held meetings with the children where we introduce them to the world of financial planning and investing and show them what a great headstart they have by beginning the journey before they were even 18 and how good financial planning can help them secure their financial future.

The fact that a majority of Junior ISAs are placed into cash respresents a huge missed opportunity in the misguided belief that cash is safer than stocks and shares. Much of this money will remain untouched for many years and as a result, it's at risk of its spending-power being eroded by inflation. There can often be a reluctance to invest in stocks and shares for children due to the perceived risks, although investing in well diversified funds can reduce the risks. It can be difficult to embrace the year to year volatility of the stockmarket, but this can be a tremendous opportunity to educate kids about investing and help them understand the power of compounding returns. The winners of this will be the 18-year-olds whose parents not only embraced investing their money, but invested time in their financial education too.