How to make your child a millionaire

Most parents save for the milestones that come early: university, a first car, a gap year, maybe a deposit on a first home. There's one milestone that rarely makes that list, and it might just be the biggest one of all: their child's retirement

It can feel strange to even think about, when your child is still small enough to fit into nappies. But retirement is one of those goals where starting early really does make an outsized difference, simply because the longer money is invested, the more time it has to grow.

Plenty of parents know about the Junior ISAs (JISA). Fewer have come across Junior Self-Invested Personal Pensions (SIPP), even though the two have a lot in common. Both let you invest on your child's behalf, and both let that money grow free from UK Income Tax and Capital Gains Tax (CGT).

Where they really part ways is timing. One is there for your child to spend once they reach adulthood. The other is there for them to use in retirement. 

Junior ISA: help for life's first big steps

A JISA is built to help your child get started in adult life. You can pay in up to £9,000 a year (2026/27), and the money grows free from CGT while it's invested. When your child turns 18, the account simply becomes an adult Individual Savings Account (ISA), and from that point on, it's theirs to use. 

For many families, that's what makes a JISA so valuable. It can help build a lump sum over the years, ready for some of the biggest milestones of early adulthood 

A JISA can be held in two different ways.

• Cash JISA - this works much like a regular savings account. You put in money and earn tax-free interest. Cash is usually lower risk and lower reward. While the money is safe from stock market ups and downs, it might lose its purchasing power if inflation is higher than the interest you earn.
• Stocks and Shares JISA - with this type, through either specific company shares or a diversified index fund. Investing is usually higher risk and higher reward. The value of stocks can go up and down, so while there’s a chance to make more money, there’s also a chance to lose some.

One of the biggest advantages of a Stocks and Shares JISA is that your child can't access the money until they turn 18. That built-in restriction encourages long-term saving, giving investments more time to ride out short-term market ups and downs and potentially grow over the years.

The trade-off is equally clear. Once your child turns 18, the account automatically becomes an adult ISA and the money is legally theirs. They can keep it invested, withdraw some of it, or spend it however they choose.

As your child approaches their 18th birthday, it's worth having an open conversation about the account. Explaining how much is there, what it could be used for, and the potential benefits of leaving some or all of it invested could help them make a more informed decision when the time comes.

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Junior SIPP: help decades down the line

A Junior SIPP works towards a very different goal. Rather than helping your child at 18, it's designed to support them much later in life when they retire.

You can pay in up to £2,880 each tax year (2026/27), and HMRC tops that up with tax relief on top, without your child needing to earn any income themselves for it to apply.

That £2,880 limit applies per child, not per contributor, so it's a single shared cap across everyone who pays in, whether that's parents, grandparents or anyone else, rather than a separate allowance for each person.

The money then stays invested until the Normal Minimum Pension Age (NMPA), which is currently 55, due to rise to 57 in April 2028. For a child born today, that means nearly six decades for their money to grow before they can touch it.

How the government top up works

Most UK taxpayers get a 25% tax top up from the government, so if you pay in £100 in eligible contributions, HMRC usually adds £25, bringing the total to £125. It's one of the few places where the government is actively adding money to your child's future alongside your own.

This isn't limited to parents, either. Grandparents, aunts, uncles and family friends can all contribute to a child's pension too, and it's a lovely alternative to another toy for a birthday or Christmas.

For example, if you pay in £100 a month on someone's behalf, the government tops that up to £125, and over a year, that's £1,500 going into their pension from your £1,200 in contributions.

What difference does this actually make?

Imagine you pay in £100 a month from the day your child is born until they turn 18, then stop and leave the money invested from there. The family pays in exactly the same amount either way, but the outcomes look quite different, because every Junior SIPP contribution gets a top up, meaning more money is invested from the very start.

Based on an investment growth assumption of 5% a year, after a 0.70% annual management fee. These figures are examples only, shown in today's money.

Under these assumptions, the Junior SIPP grows to around £317,300 by age 67, compared with around £253,800 for the JISA. That's a gap of roughly £63,500, and it comes entirely from the same £21,600 the family paid in either way.

Reaching £1 million

You can contribute up to £2,880 net a year into a Junior SIPP, or £240 a month. Whether that grows to £1 million by age 67 depends largely on the investment growth you assume.

Under the assumption of 5% annual growth, contributing the maximum from birth to age 18 could build a pension pot of around £761,500 by age 67, just short of £1 million. Under a more optimistic 8% annual growth assumption, the same contributions could grow to around £4.1 million by age 67.

At that growth rate, even a much smaller monthly contribution could grow to more than £1 million over the same period.

Based on investment growth assumptions of 5% and 8% a year, after a 0.70% annual management fee. These figures are examples only, shown in today's money.

What this really shows is how much of the work is done by starting early, rather than by paying in large amounts later on. Parents who want to save beyond the Junior SIPP allowance could also use a JISA alongside it, since the two can complement each other by helping your child at different points in life.

A simple way to boost this further

There's a tweak that can make a real difference over 18 years: increasing your contribution slightly each year, rather than leaving it fixed at the same amount the whole time.

Say you start at £100 a month and simply raise it by 5% every year, a modest annual increase, rather than sticking to £100 a month for the full 18 years.

By the time your child turns 18, you'd be contributing around £229 a month, and the family's total contributions would come to around £33,800, compared with £21,600 for a flat £100 a month.

Left to grow under the same assumptions, that could build a pot of around £469,300 by age 67, compared with around £317,300 for the flat contribution.

Remember, investment growth isn’t guaranteed and inflation can’t be predicted. But it's a useful reminder that a modest starting contribution doesn't have to stay modest forever, and even small yearly increases can add up to a meaningfully larger pot by retirement.

So which one is right for your family?

There's no single right answer because each account has a different job to do. A JISA can help your child with the first big milestones of adult life, while a Junior SIPP is designed to support them decades later in retirement. For many families, using both can offer the best of both worlds.

The biggest advantage you can give a child isn't always a larger contribution - but rather more time. 

A JISA gives investments around 18 years to grow before your child can access the money. A Junior SIPP gives them 50 years or more, with tax relief boosting every eligible contribution along the way. That extra time gives investment returns longer to compound, which can make a significant difference over the long term.

Whether you're saving for their first steps into adulthood or helping them build financial security for later life, starting early means time can do more of the heavy lifting.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.