What is a Child Trust Fund?
You have a new arrival in the family. A wonderful new addition, something that will enrich your life but there is so much to learn and you need to learn it quickly. One of the last things on your mind is the fund for university, or their first car, or their wedding but the Child Trust Fund provides a start for all of these outcomes. The Child Trust Fund is a long-term saving account that the child can withdraw the money from once they become an adult at the age of 18. The government in the UK provides you with a child trust fund voucher or CTF with the value of £250. If your household income is less that £15,575 you will also receive a top up of on top the initial £250. The top up is linked to the amount of Child Tax Credit that you receive. You need to make sure you make the claim your child tax credit within the first three months of the babies birth as the government will only back date the payments for three months. You don’t want to miss out.
But first, a quick recap on what a CTF actually is. All children born after 31 August 2002 get £250 from the government, which they can invest in a tax-free investment shelter (with children from low-income families getting £500), and that gets topped up with another £250 (or £500 if appropriate) when the child reaches the age of 7. That’s not exactly an early retirement amount on its own, but you can top it up yourself to the tune of £1,200 a year, and still have all the returns tax-free — it’s a bit like an ISA for kids. Oh, and it gets handed over to them when they’re 18. Where to put the money Also similar to an ISA, you can put the money into cash or into shares. If you choose shares, there are then two further options. A ‘Stakeholder’ CTF is restricted in that it must spread the investments to reduce risk, charge a maximum of 1.5% per year, allow additional contribution from as low as £10, and once the child reaches 13 it must start moving the money to lower-risk investments lik
