Tips for finding the perfect ISA

When it comes to saving money for the future, opening an Individual Savings Account (or ISA) can be a great way to build a nice nest egg for the years to come, completely tax-free! But which ISA is best for a person’s specific needs? And how does one tell them apart? 

What types of ISA are available? 

Junior ISAs

Junior ISAs are a great idea for parents or legal guardians looking to provide financial support for a child’s future. The best Junior ISA benefit is probably the fact it’s possible to save up to £9,000 per year, completely tax-free. Anyone can contribute to a child’s ISA, and when the account holder turns 18, they’ll have full access to their funds as a legal adult. 

Lifetime ISAs

This ISA allows savers to stash away up to £4,000 per year and was created to help people save up for either retirement or a deposit on a first home. What really makes this ISA attractive is the fact the government will contribute a 25% bonus on whatever is saved within that time. To open an account, one has to be aged between 18 and 39 to open a Lifetime ISA. 

Cash ISAs

As the easiest ISA to maintain, Cash ISAs are a popular choice. It works a lot like a standard savings account, and one can save up to £20,000 per year in a Cash ISA, completely tax-free. 

Stocks and Shares ISAs

This ISA works a lot like a Cash ISA, but money is being invested into the marketplace instead of being saved, there are more risks associated with the account. Account holders can pay up to £20,000 annually into this ISA, tax-free. 

Do ISAs have any risks? 

Ultimately, this depends on the type of ISA chosen from the above options. A standard cash ISA doesn’t come with any risk, as the money isn’t invested in any risky assets. 

As mentioned above, a Stocks and Shares ISA comes with a lot more risk, due to the money invested in various marketplace areas. However, this also means that there is a higher potential reward if those investments pay off. 

Essentially, with a cash ISA, one is looking at a more secure and steady gain, whereas a Stocks and Shares ISA can fluctuate depending on market volatility. 

How to be sure to choose the right ISA

This should give a good idea of which ISA will work best, but for anyone still in doubt, it’s a good idea to ask these questions:

• Who is the ISA for? 
• How much risk am I willing to take? 
• What is the end goal of the ISA? 

If it’s possible to answer these questions honestly, it’s pretty easy to find the perfect ISA for any needs, and keep the future more secure. 

When it comes to the reasons why someone might want to prepare for the future, no two situations are ever the same. But by staying focused and with some effort to keep your main goals in mind, it always possible to make the right choice and help to create a more comfortable financial future.

The editorial unit