Time is one of the most powerful tools in personal finance. And when it comes to Individual Savings Accounts (ISAs), starting early can unlock huge long-term benefits. Thankfully, we can open a Stocks and Shares ISA at any age in the UK — it’s just called a Junior ISA for juveniles.
Opening an ISA for a child at birth, even with modest contributions, allows decades of uninterrupted compounding to take place. For example, just £50 a month invested from birth with a 6% annual return could grow to over £100,000 tax-free by the time that child turns 40. That’s without ever increasing the monthly amount.
And that’s what I’d call fairly modest growth. The US index, for instance, has delivered more than 10% annualised growth over the past decade. So £50 a month over 40 years could reach £318,000 at that rate.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Leveraging time
Small, consistent deposits made over a lifetime can snowball into a significant pot. That’s the power of compounding in action. It’s when we start earning interest not only on initial contributions but also on accumulated returns year after year. The effect intensifies with time, making early investing vastly more efficient than trying to catch up later in life with larger sums.
This is exactly why I started a SIPP (Self-Invested Personal Pension) and ISA for my daughter at birth. For now, it’s her family contributing, but when she starts working, she can contribute as well. The result is potentially an eight-figure portfolio by the time she’s in her 50s. Even with inflation, that should be enough for an early and easy retirement. The earlier the habit is formed, the greater the benefit.
Interestingly, this idea has circulated around politics too. Former Labour MP Frank Field once floated the concept of a Baby Bond. This a lump sum given to every newborn, invested over a lifetime to provide a cushion in old age. Similarly, under the Child Trust Fund scheme introduced in the early 2000s, the UK government gave children born between 2002 and 2011 a financial headstart, aiming to instil long-term saving habits.
Where to invest?
Investors looking to build long-term wealth should consider spreading their ISA holdings across a diverse range of stocks. After all, investors can lose money if they invest poorly.
One UK stock that I believe is worth consideration now is Arbuthnot Banking Group (LSE:ARBB). While it operates under the radar compared to high-street banks, Arbuthnot has quietly built a reputation for operational resilience.
In H1 2025, profit before tax halved due to falling interest rates — already priced in by many investors. However, key metrics remain strong. Customer deposits rose 14% year on year to £4.42bn, while funds under management climbed 22% to £2.38bn, supported by £127m in net inflows. Specialist lending also grew by 7%, even as total customer loans fell. The bank’s capital ratios are healthy, with a CET1 ratio of 12.7%.
Investors should be wary that the bank’s small size (it has a market cap of £170m) make mean its more volatile than its peers. That’s something to bear in mind in a cyclical industry.
However, the valuation looks attractive. Arbuthnot trades on just nine times 2025 earnings, a price-to-book ratio of 0.59, and offers a 5.3% dividend yield. These fundamentals make it a serious contender for long-term ISA growth.
