The choice of investment funds can be baffling and can put people off starting to invest.
But putting your money to work in investments, whether they be shares, funds, bonds or property, can help you grow your wealth, achieve your financial goals more quickly and build up a pot to cushion against times when your income may be lower.
One popular way to invest is in an ISA.
What is it?
An ISA (Individual Savings Account) is a good place to start if you are looking for a way to save or invest.
There are different types of ISA but the most popular are:
· Cash ISAs – which has similar features to savings accounts, but the interest you earn is tax-free and you're allowed to save up to your annual ISA allowance.
· Stocks and shares ISAs – which can include shares in companies, unit trusts and investment funds, corporate bonds and government bonds.
· Innovative Finance ISAs – designed for peer-to-peer lending.
Each tax year, which starts on 6 April, you get a new ISA allowance.
Make it work for you
For the 2016-2017 tax year, you are able to put £15,240 into an ISA and from this amount you are able to earn interest on this amount tax free.
In order to open an ISA you need to meet certain requirements:
1. You must be 16 or over to open a cash ISA and 18 or over for a stocks and shares ISA.
2. You need to be a resident in the UK.
There are a number of ways to open an ISA, they are available from a range of banks, building societies, credit unions, friendly societies and stock brokers.
While the ISA allowance is £15,240 for cash and stocks and shares ISAs, it is £4,080 for Junior ISAs.
What’s a Junior ISA?
Junior ISAs replaced the Child Trust Fund (CTF) but come with no government pay in.
They provide a tax-efficient children's savings account because there's no personal income or capital gains tax to pay on the growth in the account value.
To get a Junior ISA your child must be:
• under 18
• living in the UK
You can get a cash or stocks and shares ISA for your child. Parents or guardians with parental responsibility can open the account and manage it but the money belongs to the child. The child can take control of the account when they’re 16, but can’t withdraw the money until they turn 18.
Can I get to the money?
ISAs work like any other savings account - you can take money out at any time.
However, just like regular savings products some ISAs may run for a fixed period or require notice of withdrawal – and you may lose some interest or bonus if you withdraw early.
The Cash ISA is most suitable for short-term savings, so that you can get at your money easily. The Stocks and Shares ISA may be appropriate if you can afford to leave your money untouched for longer periods.
The Innovative Finance ISA could, perhaps, be seen as something of a halfway-house between the two.
If you can afford to set up a Junior ISA it is a brilliant way to save money for your children’s future. But remember, you can’t access that money after you have paid it in. It belongs to the child.
Annual allowance limits on adult ISAs are to increase to £20,000 in 2017-18.