It’s nearly the fifth anniversary of Child Trust Funds, having been introduced on 2nd September 2002. Child Trust Funds (CTFs) are started with a £250 or £500 deposit from the State, depending on the financial status of the parents. Parents, relatives and friends can then top the CTF account up with £1,200 a year. The money is either held in a cash savings account or in a stock market-linked fund. The money is tax-free until the child reaches the age of 18.

More than 3 million children are now the holders of a CTF with many more opened each month. The majority of these CTF accounts are stakeholder CTFs with the money invested in shares and other investments. Two of the big attractions of a CTF account is the ‘free’ money given to start up the account, and the fact that no-one can touch the account until the child reaches the age of 18, when the money can then be withdrawn by them to do with as they wish.

Over £1 billion of taxpayers’ money has been handed out in the form of vouchers for the trust funds since the scheme began. On average, around £20 per month is saved into each CTF per account which means that in a cash savings account paying around 3.5%, the child would have around £7,000 saved when they reach 18.

The CTF is a good scheme for children’s savings because the money earned is tax free and it cannot be touched meaning there is no temptation to ‘borrow’ from their savings. Birthdays and Christmas are a good time to promote your child’s CTF to relatives and grandparents who can contribute directly into the account,

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