Child Trust Funds -
Don’t Waste Your £250!

The Child Trust Fund, a £250 nest egg for all babies born after 1st September 2002 has just celebrated the first anniversary of vouchers being sent out. Yet an estimated one million vouchers have not yet been used.

The vouchers must be put into a special account and the money cannot be taken out until the child turns 18.There are several choices that a parent must a make, between a cash or share account, stakeholder or non-stakeholder.

Parmjit Dhanda MP appealed to his constituents in Gloucester not to waste the money.He says “I want parents to set up a Child Trust Fund for their child as quickly as possible so they can make the most of the payment.Delaying starting up the account will mean your child's nest egg could lose out on up to a year's growth.”

“Children in families with low incomes will get an extra £250 payment into their Child Trust Fund account. If you open an account the payment will be made directly into your baby’s account - even more of a reason to open one soon!”

An estimate from the Halifax suggested that that by January 2006, 75% of lower income families had yet to open their CTF accounts, whereas almost 70% of the richer families had already done so.

After a year, a share based account will automatically be opened for your child if the voucher has not been used.However by this time you will have missed out on a year’s worth of interest on the investment.

Which begs the question, why are the people who need the money the most, least likely to have opened an account?Probably because like the ISA, another scheme which was intended to help those on low incomes to save, has been made so complex that few can understand it.

For an excellent overview of all the options see this document from Money Saving Expert Martin Lewis (PDF file).

Child Trust Funds - Don't Waste Your £250!
Tips For Avoiding Possible Identity Fraud