As Junior Individual Savings Accounts (Jisas) reach their third anniversary this weekend, only a tiny proportion of parents have so far cottoned on to the long-term investment potential of a stock market-based fund.

Only one in five parents have so far chosen a Jisa, the long-term savings fund which locks up the cash till the child is 18.

Of those who do have a Jisa, almost 70% have opted for a deposit-based account, leaving the brave few to invest in a stock market-based Jisa, says Tilney Bestinvest, the adviser and investment platform.

The firm's managing director, Jason Hollands, says: "It's disappointing to see that such a high proportion of Junior Isas have been invested in cash at a time of record low interest rates. Cash is frankly a dreadful place to invest for the long term, as the real value will be steadily depleted by the impact of inflation."

In the past three years, the UK's all-share index has delivered a return of 48% while the S&P 500 index of top US shares is up 79%. "Those who did invest in equities in the first wave of Junior Isas three years ago will be way ahead of those who chose cash," Hollands notes.

He argues that because Jisas can only be accessed at age 18, parents with very young children have a long enough time-horizon to take more risk, for more reward, by investing in equities. "While returns on equities over the next few years may not be at the stellar levels of the last three years, we continue to believe that, on a longer term view, equities offer considerably greater potential than cash. Cash-based Jisas should really only be considered by parents with teenage children who might need to draw on their investment within a couple of years," says Hollands.

Across the UK, four parents out of five are putting something away for their children, according to research for Scottish Friendly. It found 51% of families have a bank or building society savings account, and 15% use a children's current account. Only 21% have a Jisa, and 26% a Child Trust Fund - the predecessor of the Jisa, for which children born after September 1, 2002, were eligible. One in 10 families has investments for children.

Calum Bennie, Jisa marketing manager at Scottish Friendly, said: "Stocks and shares investments can of course go down as well as up and the original investment is not guaranteed but, over a long investment period, you are giving your money the chance to ride out the volatility of the stock market."

Next April, the UK Government will allow parents to transfer Child Trust Funds to Jisas, giving better rates and choices for parents who still hold these for their children.

The research found that of those parents who currently have a Child Trust Fund (CTF) set up in their child's name, just 8% plan to keep the money where it is. One in three are planning to move the money into a Jisa, while one-quarter have yet to make up their mind.

Parents who do plan to transfer their funds can opt for a cash Jisa or an investment Jisa.

"The funds that people choose to invest in through an investment Jisa will be dependent on the personal preferences of the investor, their attitude to risk, and knowledge of the stockmarket," Bennie says. "Fund choices include UK stock-market trackers to more exotic overseas funds."

But one-third of parents do not know that moving the money is an option, a finding confirmed by an awareness survey for the SavvyWoman website.

It found half of parents unaware that children with a CTF could not also have a Jisa, and only 55% knew that there was a limit on annual contributions.

In fact, parents or guardians, family and friends can pay into a Jisa every year with a £4000 limit for the current tax year. Children can have one cash and one stocks and shares Jisa. Money cannot be withdrawn before the child is 18 when the fund matures and it is theirs to manage. It is automatically rolled over into an adult Isa unless the child withdraws the money. The top rates on cash Jisas are currently 3.25% from the Coventry Building Society (available by post, phone or internet) and from the Nationwide (branch only), and 3.02% from the Skipton (branch or post), according to Moneyfacts.

For those who buy into the logic of using an investment Jisa for younger children, the top funds used by Tilney Bestinvest customers give some clues as to where parents think the best long-term prospects lie.

They include Axa Framlington UK Select Opportunities, Threadneedle UK Equity Income, Liontrust Special Situations, First State Asia Pacific Leaders, Aberdeen Asia Pacific and Japan Equity, Newton Global Higher Income, Standard Life Global Absolute Return, and one tracker fund - the HSBC FTSE 100 Index.