Education and finance
Finances for a flying start
Invested wisely, your Child’s Trust Fund account could give them a kick start to their adult years. Clare Scott Dryden explains
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The celebrity sumer baby boom may have passed you by, but Jordan, Charlotte Church, Myleene Klass and Emma Bunton are just some of the new mothers facing up to the reality of nappies and sleepless nights. Saving for their little one’s future might be the last thing on their minds. However, with the government’s Child Trust Fund (CTF) scheme now in its third year, more and more parents are realising the benefits of saving for their child’s future – given the rising costs of higher education and getting on the property ladder, every little helps!
All children born in the UK after 1 September 2002 who receive Child Benefit are automatically eligible, as long as they’re not subject to any immigration restrictions. Parents don’t have to make a separate claim or fill in any other forms. Information packs and vouchers will be sent out shortly after the first Child Benefit payment is made.
Family Investments estimate that £62.5m has already been saved into CTF funds in lump-sum payments alone since the scheme was launched in 2002, which could create a windfall of around £145 million as accounts mature. An increasing number of parents are setting up regular direct debits into their child’s account, realising that payments made in the early years could make a huge difference to the fund’s final value. Parents choosing a typical stakeholder account who top up their initial £250 voucher with an average £22 per month, could build up a lump sum of £8,800 for their child when they reach 18 years of age, giving children a well-needed kick-start to their adult lives.
Key facts about the Child Trust Fund
- A long-term savings and investment account where your child (and no-one else) can withdraw the money when they turn 18.
- Neither you nor your child will pay tax on income and gains in the account. £250 voucher to start each child’s account.
- A maximum of £1,200 each year can be saved in the account by parents, family or friends.
- Children in families receiving Child Tax Credit (CTC) with a household income not greater than the CTC threshold of £14,495 for 2007/08 will receive an extra payment.
- Money cannot be taken out of the Child Trust Fund once it has been put in – once your child is 18 they will be able to decide how to use the money.
- Children can start to make decisions about how the money is managed when they are 16.
- The government will make a further contribution when your child is seven – all eligible children will receive a further payment of £250 into their CTF account at age seven, with children in lower income families receiving an additional £250. These payments will be paid around the child’s seventh birthday direct into their account.
- There is more than just one type of CTF account – you choose the type of account you want for your child.
- You can move the account to a different provider or change the type of account at any time.
- It will not affect any benefits or Tax Credits you receive.
For more information, visit: Website: www.childtrustfund.gov.uk
