2 fantastic ways to invest for children and help set them up for life

5 November 2025

Investing for children is one of the best presents you can give to youngsters you love.

In fact, because time is key to growing wealth through compounding, if you invest for children early enough, you could give them the gift of a lifetime.

Giving children a healthy financial start to adulthood could help them:

• Fund further education
• Take a solid step onto the property ladder
• Go travelling without worrying about the cost of decent accommodation along the way.

As well as the invaluable financial freedom they might enjoy, investing for children is also a fantastic way to help them learn important money lessons. As they get older, you can involve them in conversations and decisions about how and where their money is invested.

Investing early and saving consistently could give children a strong financial footing in adulthood

Invest for babies and young children, and you’re already winning. The sooner you start, the longer the money will be invested and the more your infant could benefit in later life.

Regardless of how or when the money may be spent in the future, taking advantage of the first 18 years of a child’s life will put them in a powerful position to generate more wealth. It could make a massive difference to their life choices in early adulthood.

Sky News recently reported that investing in a child’s future through regular pension payments could turn £51,000 into £737,000. Indeed, assuming consistent 5% growth, paying £2,880 each year from birth until they reach 18 could provide a pension pot worth more than £737,000 by age 57.

Alternatively, investing £9,000 in a Junior ISA (JISA) from birth to age 18 would represent a total investment of £162,000 and could grow to £266,000 by age 18. If left untouched with no further investment, assuming growth of 5% a year, it could be worth £1.8 million by age 57.

Remember, the value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Child’s pension v Junior ISA – which investment vehicle will suit your goal?

When investing for children, there are two main options: a Stocks and Shares Junior ISA (JISA) or a child’s pension.

Here are the details of how each works.

1. Invest in a Junior ISA

A JISA is a useful long-term investment vehicle that allows you to save up to £9,000 a year (2025/26).

While parents or guardians must open the JISA, once set up, anyone can make payments into it.

One of the primary benefits of investing in a JISA is that you guarantee the money belongs to the child. The child is the ultimate owner of the JISA and only they are allowed to access the money.

Once they reach age 18, they can withdraw the money. Alternatively, they could allow the JISA to automatically transfer to an adult ISA, keep the funds invested, and continue to make further payments into it on a regular or ad hoc basis.

Potential returns on a JISA

If you saved £9,000 into a JISA every year from the child’s birth, the JISA could be worth £255,953.68 by the time they turn 18. This calculation is based on an assumed growth rate of 5%.

The above sums assume all dividends are reinvested and don’t take account of fees, which will influence the final sum.

Whatever growth rate you achieve, there’s no disputing the long-term power of compound interest. If you can’t put away as much as £9,000 each year, save what you can into a JISA for your children or grandchildren, and over time you should still see healthy growth during their childhood.

When money is withdrawn from the JISA, it will be free of both Income Tax and Capital Gains Tax.

2. Start contributing to a child’s pension

An alternative to a JISA is to save into a pension. As with a JISA, the pension must be set up by the child’s parent or guardian. Once in place, you can pay money in and receive tax relief on payments up to £2,880 each tax year (2025/26).

The government automatically tops up contributions by 20% – even for a child – so an annual payment of £2,880 becomes £3,600.

Of course, you can pay in more than this, but you’ll only get the tax gains on the first £2,880 you contribute, unless your child or grandchild has earnings above this amount.

Potential returns on a child’s pension

If you invested £2,880 into a child’s pension every year from when they are born, the pension fund could be worth £104,761 by the time they are 18.

The above calculation is based on the full invested amount of £3,600 every year, growing at an assumed rate of 5%.

If they continue to contribute at the same rate over the next 50 years, their pension pot could be worth more than £2 million. This calculation assumes annual growth at 5%.

The above sums don’t take account of fees, which will make some difference to the final sum.

As long as the pot doesn’t exceed £2 million, any growth is free of tax, which helps it to increase in value. Like any investment, its value can go down as well as up.

Get in touch

If you want to give the gift of a lifetime and would like to discuss the available options, or the type of fund which might be suitable, please get in touch.

Email info@depledgeswm.com or call 0161 8080200 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.