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Investments For Children - Jargon Buster

The world of finance and investments sometimes seem to have a language all to its self. Our useful jargon buster explains many of this complicated terminology.


abacusAnnual Equivalent Rate - AER
This is the interest rate shown to display any actual interest earned which is compounded throughout the whole tax year. If your Junior ISA or
Children’s savings account pays a monthly interest rate then you would have to leave your money in throughout the whole year to achieve the AER rate.

Child Trust Fund
This has been one of the most popular Investments For Children and is a tax free savings platform set up by the government to help encourage families to save towards their child’s future and provide a lump sum of money for when they reach 18 years of age. Every eligible child received a £250 voucher at birth and then another £250 voucher when the child reaches 18.

UPDATE: The
Child Trust Fund is now no longer available as it has been replaced by the new Junior ISA.

Compound
This refers to the ‘compounding of interest’ and is where your savings and all the interest earned on your savings are added together (compounded) to work out the total interest earned on the total amount.

 


Fixed Rate Interest
This is where the rate of interest on your savings /
Child’s Investment remains the same throughout an agreed term.

IFA
The abbreviation for ‘Independent Financial Adviser’ who can offer independent advice on many different financial products and services as well as compare products from a wide range of providers.

ISA
The abbreviation for ‘Individual Savings Account’ which is effectively a tax wrapper used to protect your savings from being taxed.

JISA
The abbreviation for ‘Junior ISA or Junior Individual Savings Account’ which is popular amongst investments for children and is the same as a regular ISA but is specifically for Children.

Interest Rate
This is the level of interest you earn on any investments or savings you have in an account.

Matured / Maturity
Some investments and savings accounts will be fixed for a certain length of time ‘Term’ and when that time has arrived the account/investment is said to have ‘Matured’.

Monthly Interest Rate
This is where the interest paid on an account is calculated and paid on a monthly basis.

Per Annum / PA
This simply means per year. For example, you are only permitted to invest a maximum of £3600 per annum into a junior isa which means you can only invest a maximum of £3600 per year into a JISA.

Sharia / Shariah Investments
Sharia investments are investments which comply with Sharia law and invest in guidance with the Islamic Investment Guidelines.

Variable Interest Rate
This is where the interest rate can vary on an account and can go up and down at any time.
 

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