Matthews IFA Ltd
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Tax wrappers too good to ignore!

Last September saw tuition fees increase nearly threefold for those heading into higher education, and if you add to that the effects of rising costs of living and accommodation - an average student is facing a debt of over £50,000 in the space of three years for the privilege.

According to investment specialists, Hargreaves Lansdown, a child born in 2013 will face debt levels of around £100,000 for university, once inflation at 3% is taken into consideration.

If the interest being charged is at 6% then this debt level increases to around £216,000, if the student takes 30 years to pay it off at £600 a month.

This sort of compound interest on debt can cripple a young person's ability get on to the property market, or save for a financial goal.

1st November saw the first anniversary of the launch of the Junior ISA (JISA), this Government's flagship children's savings scheme and replacement for the previous governments' Child Trust Fund (CTF).

Despite 6 million children instantly qualifying for JISAs, recent figures from HMRC show that the take up falls far short of expectations, with around 72,000 accounts having been opened. But with some parents getting their child benefit axed, are Junior ISAs too good to pass up?

Jason Hollands, managing Director at Bestinvest, says: "Young people are increasingly starting adult life with significant financial burdens on their shoulders.
It is estimated that the average cost of a university degree for someone starting a course this year could be in the region of £50k while getting a foot on the property ladder now entails accumulating a substantial deposit. Parents who are in a position to do so should therefore start saving for their children at the earliest opportunity. In this respect Junior ISAs should firmly be on their radar if their children don't already hold a Child Trust Fund."

JISAs are attractive for a number of reasons, not only are they tax-efficient but once the child reaches 18, it is possible to tip the investments in the JISA into a regular ISA, where they could remain tax-free for life.

This is a good way of giving a child a head start in life and could also alleviate any financial pressure for the parents in the future.

JISAs do avoid many of the tax issues of traditional adult investments, but there are some limitations. In a tax year, a parent can only put away £3.600, in either cash or stocks/shares Isa and that is only providing that they have not already got a Child Trust Fund.

In order to use the JISA allowance for this financial year, the investment must be made before the 5th April, so use it or lose it!

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