One in 20 younger savers clear out their Junior Isa at 18, however a 3rd ADD to their account

Only around one in 20 young savers empty their Junior Isas when they gain full control over the fund at age 18, a new study shows.

One in ten take out more than half of the money within the first year, while one in five make a withdrawal of some amount during this period.

But many contribute more to their savings, with a third of young people with Junior Isas doing this when their account matures into an adult Isa, according to three years of customer data analysed by AJ Bell.

Parents considering opening Junior Isas can feel encouraged by news that most young adults don’t plunder their savings as soon as they get access to the money, says the investing platform.

You can stash up to £9,000 a year in a Junior Isa for a child, who can take control when they are 16 but cannot make a withdrawal until they are 18.

Only a parent or guardian can open and manage a Junior Isa on behalf of a child, but grandparents and other family members and friends can pay in once an account is set up. 

The annual allowance can be split between a cash and a shares Isa each year.

Sensible: A third of Junior Isa holders contribute into them once they become an adult

Previous research has shown some parents saving into Junior Isas keep their children in the dark about their windfall until they are 18, fearing they are not financially mature enough to know, or will spend all the money immediately they get access to it.

However, others engage children in decisions about their Isa and use it as a chance to teach them about money in general or about how to invest.

AJ Bell didn’t have information about how 18-year-olds spend their Junior Isas once they are withdrawn, but travel, cars and uni costs are often big ticket items for young adults.

‘One of parents’ biggest worries when opening a Junior Isa for their child is that when their child turns 18 they get control of the account, and can do what they want with it – including spending it all,’ says Laura Suter, director of personal finance at the firm.

‘But it’s actually far more common for young investors to continue to contribute to their Isa than blow their Junior Isa savings.

‘Of course, these figures look at the more extreme scenarios – many 18-year-olds are far more likely to adopt a combined approach, perhaps withdrawing some money to fund travel, further education or other spending plans, but keeping the rest invested for the future.’

Suter adds that Junior Isas are one of the best tools for parents hoping to set their children up for later life through long-term investing.

She says if you put away £500 a year for a child from birth they could turn 18 with a portfolio worth almost £14,770, based on a 5 per cent annual investment return including charges.

If you maxed out the £9,000 allowance until a child was 18 they could end up with £265,850, using the same calculation.

A one-off gift of £500 could turn into £1,200, or £9,000 paid in once could reach £21,660 after 18 years.

Most families who contribute into a Junior Isa do so when a child is aged between five and 14, according to freedom of information data for 2022/23 obtained by AJ Bell.

This is probably explained by the financial squeeze on parents funding childcare, making it difficult to save in the first few years until their child is in school, says the firm.

This also shows around half of contributions in that year were under £500, but more than 70,000 accounts – one in 20 of the total Junior Isa accounts – received the maximum subscription of £9,000.