Child Trust Fund Hints

Over recent years the government in the UK has introduced a new initiative that is designed to encourage parents to save for their children, enabling them to enjoy a brighter financial future. The government offers a kick start to new parents that want to start saving for their child by offering a voucher of up to £500.

This initiative has been applied to all babies born after September 2002. The Child Trust Fund is basically described by the government as a savings and investment account for children, and although parents can continue to add money to the account after it has been opened with the voucher the deposits cannot be touched until the child is eighteen years of age, at which point he or she can start using the money to help them on their way as adults.

The amount that you will receive by way of a Child Trust Fund voucher will depend upon the level of your household income. Those earning over £13910 will be entitled to a £250 voucher, and those with a household income of under this amount will be entitled to a £500 voucher.

Once the account has been opened with the voucher up to £1200 per year can be added to the account by way of deposits. This means that by the time the child reaches the age of eighteen he or she could have over £32,000 to start them on their way as adults, based on a £500 voucher and the full £1200 being added to the account each year, and depending on interest rates.

No tax is charged on income and gains with the Child Trust Fund account, making this an excellent way to save for the future of your child. Of course, if you want to save more than £1200 per year for your child you can always open another account alongside the Child Trust Fund account.

When the child turns seven years of age an additional voucher of either £250 or £500 is paid into the account – again, this will depend on the level of your household income. Although the money in the account cannot be touched by anyone other than your child, and even then only when he or she turns eighteen the child can start to make decisions on how the money is managed once he or she turns sixteen.

There are a number of providers and account types available when it comes to the Child Trust Fund, and you can change provider or account type at any time – although the same rules and regulations with regards to the deposits not being touched will apply.

The different types of Child Trust Fund accounts available are simple savings accounts, investment accounts where the money is invested in shares, and stakeholder accounts. You get to decide the type of account in which the money is placed, and you can change whenever you want. This is until the child turns sixteen, at which point he or she can make this decision.

You can get help and support from the government when it comes to selecting the right account for your child, and you should bear in mind that as with any other type of investment account you could lose money if you decide to invest in shares.

With the savings account, however, the money and any interest will belong to the child when he or she turns eighteen. The only exception when it comes to anyone other than the child having access to the money is if the child is terminally ill or dies, in which case the money would be passed on to the parents.