At a time when the value of some university degrees has sadly been brought into question and high inflation has pushed up the cost of a degree, life isn’t getting any less stressful ahead of A-level results day.
And it’s more stressful for some than others. Some fortunate teenagers are set to receive a significant financial leg-up in the form of a Junior ISA, which is theirs to access for the first time and spend how they see fit when they turn 18.
On interactive investor, the average value of Junior ISA accounts held by 17-year-olds is £21,775, rising to £22,932 among 18-year-olds who have graduated on to an adult ISA.
Building these sums of money over the long term can take discipline and process. For example, using a scenario, which is never guaranteed, £50 per month invested over 18 years generating 5% per year (also not guaranteed) would leave you with a pot of £17,533.
Many young adults are set to receive a healthy cash pot, but should those who are university-bound use the funds?
Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Since Junior ISAs are designed to provide financial support for a child’s future, they can be used to cover the ballooning cost of university education or saved and/or invested to foot costs or hit financial goals further down the line. It could be invested over the long term to help your child take their first step on the property ladder for example.
“Inflation has driven up the cost of being a student, with price rises in food, energy and rents, as well as student basics such as books, dwarfing the rise in the maximum student maintenance loan. Put simply, student loans do not stretch far enough to cover the heightened cost of living. This will force many students to make stark sacrifices to maintain financial buoyancy, which could lessen their quality of life at university. Some students will take on paid work during term time to support their studies.
“Many students fortunate enough to have a cash cushion in the form of a Junior ISA will be forced to raid it to help ease the financial burden of higher education and meet day-to-day living costs.
“A substantial cash pot can help put children on a strong financial footing when they reach adulthood, but once it gets moved into their name when they turn 18, the child can spend the money as they see fit. That could be used for university, but the point of ISAs is that it’s in your name to do whatever you wish with. Some parents might find this uncomfortable, but it’s all a learning process and it’s why conversations about money from a young age are a good idea.”