Two minute guide to... Child Trust Funds

What is it?
The Child Trust Fund (CTF) is a savings and investment account for children, which can be opened with an initial funding of £250 from the Government. The Government has introduced the CTF to help encourage saving for babies and children.

The CTF is a long-term account – the money in it belongs to the child not the parent but the child can’t take out the money until they are 18. The Government would probably want them to spend it on their education, but they can spend it how they want.

Who qualifies for the account?
All children born on or after 1st September 2002 will be sent a £250 voucher that their parents can use to open an account. Families on low incomes may receive £500. A further payment will be paid on the child’s 7th birthday.

What happens if I have twins or triplets?
Each of your eligible children will get a CTF account and you will receive a separate voucher for each child.

How do I get the money?
When you have been awarded Child Benefit for your child, you will automatically be sent an information pack and then a voucher for £250. You can then open a CTF with any of the registered providers.

What types of account are there?
There are three main types of accounts. Savings accounts pay interest on your child’s savings: these are low risk accounts but may provide lower returns over the longer-term.

Share accounts will invest your child’s money by investing in shares. Whilst shares have proven to be a better investment than savings accounts in the past, especially over a longer term, you must remember that shares can go down as well as up. These accounts are riskier than a savings accounts but have a higher potential for growth.

The third type is a stakeholder account, which is similar to a share account, but the risk is spread over more companies. Also, when the child is aged 13, the money in the account starts to be moved to lower risk investments or assets to protect the money from stock market losses as they reach their 18th birthday.

Where can I open an account for my child?
Opening an account is easy. Simply fill in an application form and then take, or post, your child’s voucher to your chosen CTF provider.