If you set up a Junior ISA for your child, like the one on this site, you probably want to make sure they use their money in the best way possible when they are old enough to access it. As kids approach 18, they might have all kinds of ideas about how they’re going to spend their money, with some of those ideas being better than others.
What Happens to a Junior ISA When My Child Turns 18?
Up until this point, your child won’t have been able to access their ISA. But once they become of age, the Junior ISA will work like any other cash ISA, giving them full access to their funds. Even though you had control over the account before, the money isn’t yours to hand over. Rather, your child will automatically become the owner of the account.
So what can you do to avoid disaster? Here are some tips on helping your child manage their money sensibly.
Open a Discussion
The last thing you want to do is lay down a set of rules dictating what your child can and can’t do. This is a sure-fire way of having them disregard every word that comes out of your mouth. Instead, communicate openly and listen to their plans. They may have a lot of them, from going to university to buying a car or taking a gap year, but they may not be as wild as you imagined.
Depending on how much money you’ve saved for them, they probably won’t have enough to do everything on their list. Help them to prioritise and manage their expectations, creating a more realistic plan for the money.
While it would be easy to cash out the entire ISA to cover every want and need, you need to emphasise the importance of saving. Try to make sure they have some money left in the account and stress that this is essential for emergencies. The lives of young people can often take some unexpected twists and turns, so having a financial buffer can be a blessing.
Offer Support Where You Can
While it may not be possible for every parent, make sure your child knows they can still come to you for support. Whether that’s letting them know their room will be ready for them should they need to move back home or driving their boxes to university, this extra help can lessen financial concerns and help them keep back some savings. You may be able to store their belongings while they go travelling or offer them some temporary work in a family business while they look for other jobs. Whatever it is you do, your child will be grateful for the helping hand.
Accept Their Independence
At the end of the day, your child needs to learn to manage their finances on their own. While you can hope they will do this sensibly, mistakes are all part of the learning process. If they spend a little too much on a new car, they’ll have to look for a cheaper place to rent. All of these decisions add up and help them to become well-rounded adults.