The Junior Isa is available to children who are not eligible for a Child Trust Fund and have a maximum contribution of £3,600.

It is expected that six million children will be eligible from the outset and then a further 800,000 each year from birth.

Like an adult Isa, the Junior Isa can be split between a cash Isa and a stocks and shares Isa.

Firms are suggesting that in such a volatile environments, parents should invest in stocks and shares rather than cash.

Tom Stevenson, investment director at Fidelity Worldwide Investment, suggests parents invest in Multi Asset or Multi Manager funds.

He said: “The merits of the Junior Isa are clear but where to invest the allowance needs consideration. With the current low interest-rate environment many savers who would have not contemplated investing in funds may now decide to do so in order to avoid the inflationary risk which comes with cash investments.

“Multi Asset or Multi Manager funds would make a sensible Junior Isa investment, especially during volatile times. Investors would not have to keep changing their asset allocation to gain from market fluctuations.”

Hargreaves Lansdown, whose HL Vantage Stocks and Shares Junior Isa is ready for the 1 November launch, suggests parents think about equity funds, especially over the long term.

Ben Yearsley, investment manager at Hargreaves Lansdown, said: “Those investing for more than five years should consider investing with top quality fund managers in a stock market Junior Isa as this will provide the best potential for returns over the long term.

“A UK Equity Income fund is an excellent choice as a core holding possibly complimented by a higher risk higher growth fund such as Emerging Market holding for those investors with the appetite for risk.”