In the UK, saving and investing are not commonly taught in schools. That means the responsibility of introducing children to money management often falls on parents and, in some cases, grandparents. This can be challenging, as investing is a complex area with many options to navigate. From 2027, pensions will also begin to fall within estates for inheritance tax (IHT) purposes, which means they may no longer be the most efficient way of passing on wealth. Against that backdrop, early saving for children is an excellent way both to build wealth for their future and to leave them money in a tax-efficient manner. 

 Grandparents, for example, can contribute to a Junior ISA or Junior SIPP out of excess income if they are concerned about IHT. This not only supports the child’s long-term financial wellbeing but can also help reduce the value of the grandparent’s taxable estate. 

At the same time, educating children is more important than ever. Social media often promotes simplistic or speculative ideas whether it’s piling into Bitcoin, chasing meme stocks, or blindly following the S&P 500. Helping children understand the basics of diversified, long-term investing gives them the grounding they need to make better decisions in the future. 

In this article, we look at a couple of the tax-efficient savings vehicles available to children and how starting early can make a huge difference. 

Junior ISAs vs Junior SIPPs 

Junior ISA (JISA): 

  • Annual allowance: £9,000 (2025/26 tax year). 

  • Accessible by the child at age 18 (converts to an adult stocks and shares ISA). 

  • Flexible, funds can be used for university, a first home, or anything else. 

  • Tax-free growth and withdrawals. 

Junior SIPP: 

  • Annual allowance: £3,600 gross (£2,880 net contributions topped up by £720 tax relief). 

  • Locked until minimum pension age (currently 57, rising to 58). 

  • Tax-advantaged growth over many decades. 

  • Inaccessible during youth, which some parents may prefer to avoid impulsive spending at 18. 

Both accounts have merits, and many families choose to split contributions depending on their goals. 

The Power of Starting Early 

Children have time on their side. That long horizon means they can invest more heavily in equities and other growth assets. While short-term returns are uncertain, historically global equities have delivered 2–8% per year depending on risk levels. This makes early contributions especially powerful. 

Below we compare three approaches: 

  • Modest: £25 per month 

  • Intermediate: £100 per month 

  • Maximum: £240 per month net (£300 gross, hitting the Junior SIPP annual allowance) 

Outcomes at Different Growth Rates 

Scenario 

Growth Rate 

Total Contributions 

Value at 22 

Projected Value at 65 

£25/month 

2% 

£3,600 

£4,024 

£9,428 

 

5% 

£3,600 

£4,775 

£38,916 

 

8% 

£3,600 

£5,693 

£155,802 

£100/month 

2% 

£14,400 

£16,100 

£37,700 

 

5% 

£14,400 

£19,100 

£155,600 

 

8% 

£14,400 

£22,800 

£623,000 

£240/month net / £300 gross 

2% 

£43,200 

£48,284 

£113,137 

 

5% 

£43,200 

£57,302 

£466,989 

 

8% 

£43,200 

£68,079 

£1,867,299 

(Values rounded for readability. Assumes parent/grandparent contributions from age 10–22, then left untouched until retirement at 65.) 

The lesson is clear: whether it’s £25, £100, or the maximum £240, the earlier you start, the more decades those savings have to grow. Even modest amounts can snowball into six-figure sums, while larger contributions have the potential to grow into millions. 

Strategies for Engaging Children 

Engagement is as important as the money itself, teaching children about investing builds knowledge and confidence. Some practical ideas include: 

  • Make it relatable: Split their portfolio perhaps between a low cost global fund and a good global company they recognise, such as Microsoft, to date a good investment, but importantly to a 10 year old the makers of the Xbox. This makes the concept tangible and sparks curiosity. 

  • Review progress together: Show them annual statements and explain how growth works. If the market moves up or down show the impact this has. 

  • Encourage contributions from gifts: Suggest that birthday or Christmas money is saved or invested, reinforcing the idea of long-term benefits, perhaps offer a “parental match” if they save £10 you will add a further £10. 

By making investing relatable and involving children in decisions, you give them ownership and interest in the process.

We were recently joined by Jia from a local school for a period of work experience who adds “Reading this article showed the impact of compound interest in a more real way. This has definitely motivated me to save a bit of my birthday money to invest”  

Key Considerations 

  • Junior SIPPs are locked away until retirement age. While this ensures long-term security, parents must be comfortable with the inaccessibility. 

  • Junior ISAs offer flexibility and access at age 18, but some parents may worry about their children having full control at that age. 

  • Affordability comes first. Parents should prioritise their own retirement savings before committing money to children’s accounts. 

 Final Thoughts 

Parents can’t control everything about their child’s financial future, but they can offer a head start. Even modest contributions, like £25 a month, add up, and the earlier they start, the greater the rewards. Alongside the financial benefit, involving children in the process helps set them up for a healthier relationship with money throughout life. 

Contact us for further information on Junior ISAs or Junior SIPPs