Investing in Your Child’s Future

Anyone in the UK who has a child born after September 1 2002 is entitled to a £250 voucher from the government to start his or her child’s account. And it is the child’s own account, only usable by the child once they reach 18. The aim is to give the child some money to help them get started in their adult life. A further payment of £250 is given when the child is 7, and children from low-income families receive extra payments at both these points. Anyone who knows the child can pay money into the account, be it parents, friends, or family, up to a maximum amount of £1200 per annum. Which is great news for the children of the UK.

To open a Child Trust Fund (CTF) first the parent or guardian of the child must claim and begin receiving Child Benefit, shortly after which the first £250 voucher will be sent out to open the account with. The next step is to choose which type of account would best guard the child’s interests. A standard savings account is the safest option: the mature account will never yield less than has been put into it, but will grow less than other types of account. The highest risk account is one that invests in shares, and so could lose money as well as make it, depending on how well the shares invested in perform. Less money could come out of the account than went in. The middle option is a stakeholder account, which also invests in shares but is subject to more stringent guidelines and so is less risky.

The rewards of a CTF can vary. The maximum amount upon maturity is £37,100, which is based upon the maximum £1,200 being deposited into the account every year. Which is a very useful amount for someone just starting out – it could be the deposit on a house, could buy a car, or pay for a university education.

If your child is too old for a CTF, there are plenty of other ways to invest in your children’s future. Legal & General is one of the biggest providers of index-tracking investments in the UK - managing £175 billion as at 31 December 2008 – and tracker ISAs require less management than other investment ISAs, meaning more of your money is invested. You will need to open the ISA yourself if your son or daughter is under 18, and, of course, there is an element of risk in any stocks and shares investment, but your child could potentially reap higher rewards than a CTF can offer, so if you have some spare cash to play around with, it’s an intriguing option. Visit the Legal & General website to find out more about opening an ISA