Child Trust Funds (CTF)
Child Trust Funds (CTF) were launched by the government way back in 2005, as a way for new parents to save for their childs future.
All new parents receive a £250 welcome voucher from the government to kick start their Child Trust Fund so even if you don’t do anything at least invest the £250 voucher.
The key points of a child trust fund are;
- This is a long term investment account, only your child is able to withdraw money from it when they reach 18
No tax is income tax or capital gains tax is paid on the investment
A maximum of £1200 can be invested per year this includes the £250 welcome voucher in the first year.
Money cannot be withdrawn once it has been deposited until your child reaches 18
A child trust fund doesn’t affect any entitlement to Tax Credits you may have
Eligible children will receive a further £250 contribution once they reach the age of 7
Things to consider about a child trust fund;
You cannot withdraw any money till your child is 18, so consider what money you do deposit are you going to need it back again at some point? If this is the case then consider just putting small amounts in it and opening a regular instant access savings account as well.
When your child hits 18 they have full control over the money, depending on how rebellious your child is when they reach 18 all your hard saving could be spend on rubbish very quickly. So if you are planning to save a sum for your child maybe split it between the child trust fund and another saving account you have full control of.
Other things to consider when choosing a fund are do you want a saving fund or investment fund?
A savings account will just work like a normal savings account so that you are guaranteed to get back what you invested plus interest.
An investment fund is linked to the stock market this means that you can potentially make far greater returns than a savings account ever could over the space of 18 years, but you could also loose money if they stock market fell.
Most people would say that 18 years would be a very good length of time to leave an investment linked to the stock market as any blips when the market fell would be cancelled out over time.
Top Saving Child Trust Fund
Most banks and building societies don’t do child trust funds because they are a hassle for them and they make little money out of them, so you will need to do a bit of homework.
One thing to watch out for when choosing a saving fund is that some places advertise CTF’s with very high interest rates, but these are generally just a limited 12 month offer so you would need to review the interest rate after a year to see that it is still competitive, if it isn’t then move the CTF to another provider.
Britannia Building Society pay 6.75% on their CTF, it stays high for the first 2 years then drops down after that.
Tops Investment Child Trust Fund
Family Investments is the market leader in investment CTF’s and have invested funds to over 400’000 parents since 2005.
In addition they now have an Ethical Child Trust Fund read more.
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