Securing Your Child's Future

Child Trust Funds were launched over five years ago to help kick-start a savings culture in the UK and promote greater knowledge of personal finance and responsibility.

By enabling parents, grandparents, other family members and friends to contribute up to £1200 a year between them, they provide parents with a means to help give their child a financial stepping-stone to the adult world once they turn 18.

Money saved into a child's CTF account can only be accessed by the child and only when they reach 18. Depending on the account's value at maturity, the CTF could help provide a springboard into adulthood by enabling them to buy their first car, assist with setting up home, or help towards the cost of further education.

With a Child Trust Fund, your child can enjoy investment growth free from personal tax. With Stakeholder CTF accounts money must be invested in a way that is linked to company shares as it is expected that these are likely to produce better returns than cash deposits over the longer term. Typically, this is achieved by investing in a collective fund which itself holds shares in a wide range of companies, to spread risk. However, parents need to be aware that share prices can go down as well as up, and their child could get back less than has been paid in. However, any money that you add to your child's CTF account while share prices are lower will be able to buy more shares in the fund - meaning that the account will have a better potential for growth should share prices start to rise.

Shares-based Non-stakeholder Child Trust Funds are also available, perhaps offering various fund options with different levels of exposure to risk (and reward). These accounts are generally better considered with the help of a Financial Adviser, so that you can tailor a CTF for your child in line with your investment preferences and attitude to risk. Muslim parents can even find a Child Trust Fund designed to be in line with Shariah Law.

Setting up a Child Trust Fund is straightforward. How you pay into the account is up to you; direct debits are the most convenient way to make regular payments, or you can choose to make one-off payments whenever you can afford to. Providers may allow you to do this online, over the phone, by post or in person. You can choose who pays into your child's CTF account, allowing other family members and friends to show their support by making valuable contributions towards the long-term investment.

Saving for your children has never been easier, and investing in a Child Trust Fund won't affect any other benefits you're claiming for your child or for yourself. By saving little and often, you can directly help your child face the pressures of starting their adult life, whether it's helping them to find the deposit on their first home or helping them to become more independent with driving lessons or a first car.

Adam Singleton writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.