Lockdown leads to surge in Junior ISA subscriptions

Laura Suter
12 August 2020

•    Number of people paying into JISAs doubles during lockdown
•    Value of average JISA contributions leap more than a quarter from last year
•    The value of lockdown savings if invested in a JISA

Laura Suter, personal finance analyst at investment platform AJ Bell, comments:

“Lots of people have found they’ve saved money during lockdown, whether that’s not paying for commuting costs, the cost of childcare disappearing, not going on the family holiday or just going out less. While it would be tempting to save this money to splurge once the pandemic is fully over, some savvy parents are clearly putting the money away for their children’s future. 

“There’s been a big increase in the number of people putting money into their children’s ISAs during the past three months. From April to June there has been a 113% increase in the number of people paying into a Junior ISA when compared to the same period last year*, showing that many have used lockdown to organise their finances and put their savings to good use. 

“There has also been a rise in the total amount people are contributing, up 127% over the past three months when compared to the same period last year. Average subscriptions per JISA have risen by 26%, from £1,853 to £2,326. However, there was a dramatic increase in the Junior ISA allowance in April, from £4,368 up to £9,000, which some parents may be making full use of and could skew the figures.

“Even putting away an extra £50 a month can really boost your child’s savings pot, as with 5% growth a year after charges this would add up to almost £8,000 over 10 years. If you could afford to bump this additional contribution to £100 a month then you’d give your kid an extra £15,850 in their pot after a decade, assuming the same 5% return.

What lockdown savings mean for a JISA:

Cost of commuting = £10,480

The average cost of commuting per month is £66.13**. During lockdown lots of people have been working from home and many expect to only go back to the office part-time or not go back at all. So if parents saved the cost of one of them commuting each month and put that money into a Junior ISA they would have £10,480 after 10 years. Even after five years they’ve have built up almost £4,600 extra.

Cost of childcare = £7,063

It costs £1,084 on average for a child under the age of two to have full-time childcare at a nursery. Lots of people saw their nursery close during lockdown and stay shut for four months, and while this presented many with a childcare nightmare it definitely saved families lots of money. Obviously nurseries are re-opening and this isn’t a lockdown cost you can save forever, but funnelling just those four months of the average childcare cost into your child’s Junior ISA as a lump sum would boost their pot by £7,063 after 10 years, assuming 5% growth a year.

Eating out = £13,735

As restaurants shut in lockdown people couldn’t go out to eat and still many families are reluctant to go out for a meal. Even after the current pandemic is fully over many people may decide to eat out less in order to carry on saving money. If you previously went out for one meal a week costing £40 each time but you now cut that down to one a fortnight, that’s a saving of £1,040 a year. If that’s funnelled into a JISA instead it would amount to £13,735 after a decade.

Cost of a holiday = £4,365

Lockdown has meant that many families have cancelled holidays. While some might be re-booking a UK break or venturing abroad later this summer, many will have cancelled for this year and saved the cash instead. The average spend per person for a holiday abroad is £670, according to figures from the Office for National Statistics. This means that for a family of four it would cost £2,680 per holiday. That same lump sum of money funnelled into a JISA as a one-off would equal £4,365 after 10 years, assuming 5% growth a year.

*Figures taken from AJ Bell Youinvest customers for April, May and June 2020 and 2019.
** Based on figures from Lloyds on the average commuting cost: 
https://www.lloydsbankinggroup.com/Media/Press-Releases/2019-press-releases/lloyds-bank/british-workers-spend-492-days-of-their-lives-travelling-into-work/

Laura Suter
Head of Personal Finance

Laura Suter is head of personal finance at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.

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