Parents and guardians now have a new way to save for their kids and feel good with the launch of The Big Exchange sustainable Junior stocks and shares Isa.
The Big Exchange says its new Isa only invests in funds that are proven to be making a positive impact on either the environment or society.
Could this be a worthwhile financial Christmas gift for your children? Here, Which? looks into what the new investment account offers and how it stacks up against other ethical stocks and shares Isas on the market.
The Big Exchange launched in October 2020. It's co-founded by social enterprise The Big Issue and a host of industry partners such as Civitas, Liontrust and Aberdeen Standard Investments.
It offers several types of investments, all of which aim to give people a way of making a positive social and environmental impact with their money without having to sacrifice on their returns.
The Junior Isa is a account, which means the money you deposit is invested. This means there is an element of risk involved, and you're not guaranteed to get out as much money as you put in, but equally, any growth will be tax-free as it's all held within an Isa wrapper.
One of the pros of the account is that you have the option to choose funds that support the impact area of your choice, which are also graded depending on how impactful they are.
If you don't want to pick your own funds, there are bundles available (more on these below).
The account must be opened online by the parent or guardian of a child who is under the age of 18.
If you go for one of the bundles, there's the usual 'cautious', 'balanced 'or 'adventurous' options depending on your appetite for risk. You can see how many gold, silver or bronze funds sit within each bundle.
If you're picking your own funds, you can scroll through the full fund list and add each one to a virtual shopping basket.
Note that you'll have to commit to saving a minimum of £25 each month - or £300 a year. It's also possible to make additional one-off lump sum payments from £100, as long as you don't exceed the annual Junior Isa limit which is £9,000 for 2020-21.
The Big Exchange has a low annual service and admin fee of 0.25%, and there are additional manager fees for each fund you invest with that tend to range between 0.8% and 1.8% per year.
According to its fee calculator, if you were to invest £1,000 you'd pay fees of around £1.21 per month. This includes the annual fee and the average investment charge.
These charges are the same across all investments with the Big Exchange.
Fees matter, as they apply whether or not your investments perform well. The graph below shows how fees can eat into a £1,000 investment when performance is poor, neutral or good.
What is considered 'ethical' can vary, but you'd generally expect a fund derived from the following trades and industries won't be included:
Much like The Big Exchange bundles, some investment platforms offer ethical Junior Isas with ready-picked funds:
Ethical investments for kids are scarce but there does appear to be a demand for it.
When Which? asked 2,002 UK adults back in May what their top concerns were when it comes to investing, 27% said climate change and the environment, while 21% said workers' rights.
From confusing industry labels - such as 'light green' and 'dark green' investing, or 'impact' vs 'sustainable' investing - to 'greenwashing', where funds' have been made to seem more ethical than they really are, going green can seem a bit of a minefield.
As such, there are a few things you should consider before investing: