The kids are all bright

Education and savings top the list for most children if they were given a Junior ISA (JISA) lump sum at 18 years old. However parents underestimate what their children would do with the money, according to research from Post Office Savings.

Only 16 per cent of parents say their children would save most of the money when in fact, over half of 8 - 18 year olds (52 per cent) say they would be sensible and save it. Furthermore, 46 per cent of under-18 year olds say they would put the money towards their education.

The research reveals older teens have better financial awareness than parents as two thirds (66 per cent) of 16-18 year olds are aware a JISA (Junior Individual Savings Account) is a type of savings account, compared to just 50 per cent of parents. Over four in ten parents (42 per cent) say they do not know what a JISA is compared to just a third of children (33 per cent).

Richard Norman, director of savings and investments at Post Office, said: "Our research shows education and savings are top of mind for most children should they receive a lump sum of cash at 18 years old. The news is full of stories about the economy, and families are tightening their belts at home too. Evidently, this hasn't escaped the attention of the younger generation and many are taking notice of what's going on in the financial world. Rising financial awareness in a recessionary environment will hopefully ensure the younger generations grow to be financially savvy adults."

Savvy parents raise savvy kids

Mums and dads intending to invest in a JISA are considerably more likely to trust their children than those not intending to. Of those planning to invest 71 per cent say they would trust their children to use a lump sum wisely, compared to just half (49 per cent) of those not planning to open an account for their children. 

It appears the vast majority of today's children are potentially missing out on £64,800 worth of tax-free savings, as just a quarter of parents (24 per cent) plan to invest for their child's future in a JISA.  Of those who won't be investing in a JISA, four in ten (40 per cent) would prefer to save in to a traditional savings account, and six per cent say they won't be saving at all. Of those who do plan to save in to a JISA, parents plan to put away an average of £1,236 a year - just 34 per cent of the £3,600 a year tax-free allowance.

Richard Norman said: "If parents want a tax efficient way of saving for their children, then Junior ISAs are a great way to save towards a child's future. Of course not everyone can afford to invest the full amount, but every little helps. A traditional savings account should supplement the JISA allowance so parents can take the full benefits of tax-free savings."