Investing for the next generation: JISAs boom in popularity

Clare Stinton, senior personal finance analyst at Hargreaves Lansdown, points to rising demand for Junior ISAs as families look for more ways to support younger generations amid higher taxes and growing financial pressures.

Clare Stinton, senior personal finance analyst, Hargreaves Lansdown

“Higher taxes combined with the growing financial challenges facing younger generations means more families are turning to JISAs to help their offspring build financial security. The number of JISAs opened in the first month of this tax year is up 136% on the previous tax year (2025/26). 

The upcoming change to inheritance tax (IHT) may be adding more fuel to the fire and accelerating this trend. From April 2027 unused pensions will fall into the IHT net, with estimates suggesting that around double the number of estates could end up paying tax – possibly prompting families to gift sooner rather than later. 

Provided you’re not compromising your own financial security, gifting during your lifetime can be one of the most effective ways to support loved ones while reducing tax liability. Contributions from grandparents into a JISA are treated as gifts for IHT purposes, annual gifting allowances can be used, but gifting anything bigger would be treated as a potentially exempt transfer and would fall outside of IHT scope after seven years. 

Beyond the tax planning, there’s another powerful benefit: time. Money invested early has years – potentially decades – to grow tax-free through compounding. This is where you can earn returns on past returns – with a long timeline, suddenly small gifts today can become life changing financial head starts, whether it’s the deposit for a first home, or ensuring that their retirement looks rosy. 

Junior ISAs – a boost for young adult milestones

Looking to help the child in your life buy their first home, go to university, or travel the world before joining the workforce? Look no further than the JISA. Families are catching on fast, JISA openings in the first month of the tax year have jumped a huge 380% since 2023/24. 

You can invest up to £9,000 each tax year, with all interest and investment growth completely tax-free. Once opened by a parent or legal guardian, anyone can contribute regularly or on an ad hoc basis. The money is locked away until the child turns 18 – and it’s this long timeline that gives the nest egg such huge potential – meaning the investments have years to benefit from compounding.

Our calculations* show that investing the full £9,000 allowance each year from birth could produce a nest egg of around £260,000 by 18, assuming annual investment growth of 5%. 

But contributing little and often, say £1,200 a year – or £100 a month – can also have a meaningful difference, building a pot of roughly £35,000 by age 18. Contributions would total £21,600, meaning just over £13,000 comes from investment growth alone.” 

*All calculations use investment returns of 5% per year. The figures do not consider inflation or charges.