Child Trust Fund: Invest For the Future of Your Children

The cost of bringing up children and providing for their future, like everything else, is continuously increasing. In fact, a recent survey calculated that it currently costs a staggering £9,000 per year to bring up the average teenager, and the total cost of bringing up a child to the age of 21 years has been estimated to be just over £180,000. Although it is too late to help the current crop of teenagers with seemingly expensive tastes through the transition into independent adulthood, the government has introduced a Child Trust Fund scheme that aims to help children born after 1st September 2002. The scheme allows parents and the children themselves to save tax-free towards their future. Every child born on or after the qualifying date receives a voucher from the government to a minimum value of £250, which can be increased to a maximum of £500 for low-income families, to start their Child Trust Fund. There are a number of selected banks and building societies that offer specific child trust fund products, and the choice of which to invest in lies with the parents. The voucher is invested in a fund holding stocks and shares, to which there is the option for additional amounts up to a maximum of £1,200 per annum to be added every year. Of course, as the values of stocks and shares can go down as well as up, the child trust fund is just one way of saving for your child’s future. It may be worth thinking of other ways to build up considerable nest-eggs. For example, savings accounts should also be encouraged allowing children to pay their birthday monies or other funds that they receive from pocket money or doing odd-jobs, even part-time jobs directly into the account. That way, with the addition of annual interest, the child can not only watch their savings grow, but spread their investment across different methods of providing for their future. For instance, a savings account into which £1,200 per year or £100 per month is invested can amount to a substantial amount of cash by the age of 18, without taking into consideration any compound interest added. Depending upon the interest rates earned over that period it could be considerably more; easily enough to provide for a good start to adult life for your child. Similarly, an investment in a child trust fund at the same amount could provide a healthy return, dependent upon the performance of the markets over that period.