Why time is your biggest advantage

Most financial conversations focus on money: how much, where, at what return. But there’s an asset that underpins all of it, one you can’t buy back once it’s gone. That asset is time.

In our last two issues, we looked at how time can work against you — specifically the way student loan interest compounds over decades. This issue, we want to flip that around. Because when it comes to saving for your children or grandchildren, time is not the problem. It’s the solution.

Junior ISAs and Junior pensions are not complicated products. But they do one thing exceptionally well: they let time work for you. The earlier you start, the longer the money has to grow — and the difference between starting at birth and starting at ten is not marginal. It’s transformational.

What’s in it for your family

Young adults today face a different financial landscape to the one many of their parents navigated. House prices are high relative to earnings. University costs have risen. The age at which people can access a pension continues to shift upwards.

The savings decisions made for a child today won’t solve those structural challenges. But they can make a real difference to the options that child has at 18, 30, or 60. A Junior ISA pot could help with a first home deposit or fund further study. A Junior pension, left untouched for decades, can become something quite remarkable by the time it’s needed.

The key insight is simple: even a modest amount, saved consistently from birth, is worth more than a much larger amount started later. Time is not just helpful here. It’s the whole point.

The questions we hear most often

“Is it worth it if we can only afford a small amount?”

Yes — without hesitation. £100 a month from birth will outperform £300 a month started at 13, simply because of the extra years of compounding. Start with what you can and review it as life changes.

“What if they’re not sensible with it at 18?”

This is the most common concern we hear, and it’s a fair one. The money in a Junior ISA becomes theirs at 18, full stop. There’s no restriction. Our honest view is that the planning conversation — involving children in thinking about money over time — is as important as the pot itself. To help in this area, we offer introduction to investing sessions with young adults. A Junior pension sidesteps this entirely, since the money can’t be touched until retirement age.

“Can grandparents contribute?”

Absolutely. Once a parent or guardian has opened the account, anyone can pay in. For grandparents thinking about inheritance tax, regular contributions from surplus income can also be exempt from IHT under the normal expenditure exemption — making this one of the most tax-efficient gifts available. We’d always recommend a conversation with your adviser before acting on this.

“Should I sort my own finances out first?”

Usually, yes. We’d never recommend funding a child’s Junior ISA at the expense of your own pension contributions or emergency fund. Get your foundations right first. But for many families, once those are in place, a modest monthly contribution to a Junior ISA sits comfortably alongside everything else.

How we think about this at Citywide

When these conversations come up — and they come up often — we start with your whole picture.

What are your own priorities right now? What does your estate look like? How do you feel about gifting? What do you want for this child, not just financially but in terms of how they relate to money? Those questions matter as much as any allowance or wrapper.

We also know that these conversations can be unexpectedly emotional. Thinking about saving for a grandchild can bring up thoughts about legacy, about what you’re leaving behind, about what you had or didn’t have growing up. We don’t rush past that. We think it’s worth sitting with.

The numbers — two Junior ISA scenarios

Here are two illustrations we use regularly in client conversations. Both assume 5% average annual growth, net of charges — a reasonable central assumption for a diversified equity-based Junior ISA over 18 years. These figures are illustrative and not guaranteed.

Scenario A: £100 a month from birth to 18

Total paid in: £21,600. Pot at 18 at 5% growth: £35,066. The growth element alone — money the child wouldn’t otherwise have — is around £13,466. That’s not a windfall. That’s the quiet, steady effect of starting early.

Scenario B: the full £9,000 annual allowance from birth to 18

Total paid in: £162,000. Pot at 18: £265,851. The growth element is approximately £103,851 — generated entirely by time and compounding, not additional effort. For grandparents with capacity to give at this level, it’s hard to think of a more meaningful or tax-efficient use of that capital.

And then there’s the pension

If the Junior ISA plants a tree for early adulthood, a junior pension plants one for retirement. The two serve completely different timeframes — and together, they cover almost the full arc of a financial life.

A Junior SIPP works like this: contributions receive basic rate tax relief, so a payment of £2,880 a year is topped up by HMRC to £3,600. The money can’t be accessed until the child reaches retirement age — currently 57, though this may well be higher by the time a child born today gets there. For this illustration, we’ve used age 60.

If a parent or grandparent contributes £2,880 a year (net) from birth to age 18 — a total of £51,840 paid in personally, topped up to £64,800 by tax relief — and that pot is simply left invested at 5% from 18 to 60, here’s what the numbers look like:

£825,367 at age 60, from £51,840 paid in over 18 years. That figure is driven not by the size of the contributions, but by 42 years of uninterrupted compounding from age 18 to 60. The money never needed to be touched. Time did the work.

This is, in our view, one of the most underused planning tools available to families. The constraints that might seem like drawbacks — the lock-up period, the inability to access early — are precisely what makes it so powerful.

A final thought

There’s a particular kind of satisfaction in this sort of planning. Not the satisfaction of a smart trade or a good return, but something quieter: knowing that a decision made today, costing relatively little, will still be working for someone you love decades from now.

You may never see the full result of it. That, in many ways, is the point.

If you’d like to talk through Junior ISAs, Junior pensions, or how either might fit into your wider financial picture, please do get in touch. These conversations are always welcome — and they’re usually much more straightforward than people expect.

This article is for informational purposes only and does not constitute personalised financial advice. Tax treatment depends on individual circumstances and may change. Figures shown are illustrative only and not guaranteed. Please speak with your Citywide adviser before making any decisions.