Opening an ISA (individual savings account) is one of the best ways to save money. With these savings accounts, you can benefit from tax-free interest on your payments, helping you save more money faster.

However, since there are a few different types of ISAs, it can be difficult to figure out which is the best one for you. To help you decide, here’s a brief description of each of the main ISAs you can open.

Junior ISA

The Junior ISA is a great option for parents who want to save for their child’s future. With this ISA, you can save up to £9,000 per year for your child, helping you to give them a great head start as they enter adulthood, especially if you start investing early. Additionally, anyone can contribute to a Junior ISA, so other family members such as grandparents and aunts and uncles can invest in your child’s future.

The money in the Junior ISA belongs to your child, so although you can deposit money and manage the account, you won’t be able to withdraw any cash. Once your child turns 18, they’ll be able to access their money and the account will turn into an adult ISA.

Cash ISA

The Cash ISA is probably the simplest ISA. This account functions like a traditional savings account, although there’s a limit to how much money you can deposit each tax year. Currently, you can save up to £20,000 in your Cash ISA each year, and you won’t pay tax on the interest you receive.

Stocks and Shares ISA

The Stocks and Shares ISA is similar to the Cash ISA, although it’s an investment account rather than a savings account. With this ISA, you can choose where to invest your money or pay a fee to have this managed for you, and like a Cash ISA, you can pay in up to £20,000 per year. However, you should bear in mind that investing could also cause you to lose money, so you should be careful with your investments.

Lifetime ISA

The Lifetime ISA was designed to help people save money for their first home or for retirement. You can save up to £4,000 per year in this ISA, and even better, the government will pay a 25% bonus on whatever you save within this limit (so if you save the maximum of £4,000 in a tax year, you’ll receive a £1,000 bonus). However, you’ll lose this bonus if you withdraw your money for a purpose other than buying your first home or retiring, and you can only open this account if you’re aged 18-39 (although you can keep saving until you’re 50).

Innovative Finance ISA

An Innovative Finance ISA, also known as an IFISA, allows you to invest in peer-to-peer lending. Like a Cash ISA, you can pay in up to £20,000 per year, and like a Stocks and Shares ISA, you’re not guaranteed to make money from your investments. Find out more about IFISAs here.