Britons could be missing out on the chance to boost their grandchildren’s savings

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Grandparents often wish to put away money for their grandchildren to help them later on in life with certain goals. While setting aside money is not uncommon amongst many, the way in which it is done can have a significant impact. A popular savings method used by grandparents is a Junior ISA or JISA – a long-term savings account for a child’s future.

The benefit of a JISA is that while it must be set up by a parent or guardian, other relatives and friends can also help to boost the savings.

However, new research has revealed grandparents saving into a JISA since 2011 could have boosted their grandchild’s savings pots by 30 percent – if they chose a stocks and shares version over a cash ISA.

The analysis was conducted by the Centre for Economics and Business Research (CEBR) on behalf of Scottish Friendly, and looked into the kind of returns Britons may have been able to clinch.

It revealed a grandparent saving the maximum amount into a cash JISA each year since 2011 – £44,836 – would have made £2,241 in interest over the past nine years.

However, those who chose to invest cash into a stocks and shares JISA containing a fund which mirrors the FTSE All Shares Index would have made £2,691 in profit.

This is a 20 percent increase compared with the cash account, demonstrating the potential difference which can arise.

But even if a grandparent did not maximise their annual JISA contributions, they could still stand to benefit from a stocks and shares option when compared to cash.

The Cebr figures showed grandparents saving £1,200 into a cash JISA each year since 2011 would have made £705 worth of interest.

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But in comparison, a stocks and shares JISA would have offered £923 in interest now – a 30 percent difference.

JISAs are often seen as an excellent way to futureproof a child’s savings, and so Britons are being encouraged to consider the options at their disposal.

The child can only withdraw the sum accumulated in an ISA when they reach the age of 18, giving those saving into the account autonomy for a number of years.

And once sufficient enough emergency cash is put aside, stocks and shares ISAs are becoming more popular as a way to potentially increase a return.

Kevin Brown, savings and investment specialist at Scottish Friendly, commented on the issue.

He said: “Many of us want to be able to help out children and grandchildren to have the best start in life by saving or investing for their futures.

“But at the same time the research suggests that many of us are not making our money work as hard as it could because we are wedded to the idea of saving into a poor-paying cash savings account.

“Our research clearly shows that for those who want to maximise their grandchild’s returns, investing gives them more potential for growth for that money rather than keeping it in a secure savings account that is paying little over one percent at best.

“However, we know that part of the reason some people tend not to invest is because they feel they don’t know how or are afraid of losing money.

“That’s understandable. Perhaps the best way to get over that is to start investing little and often until you are comfortable with it.

“You may be surprised by how quickly your money could grow.

“Of course, history doesn’t provide us with certainty to make future decisions and you must remember that the value of investments can go down as well as up and you could get back less than you paid in.”

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