All About the Child Trust Fund

Starting up a savings plan for your child couldn't be easier – if he or she was born on or after September 1, 2002. That's the cut-off date for children to qualify to get a Child Trust Fund, or CTF, a £250 voucher from the government to invest for them until they turn 18.

Nobody can touch a CTF until the child comes of age, and the money invested is not liable to tax on the income it generates in interest etc. There is a limit on the amount you can put into a CTF, which is £1,200 per year. When your child turns seven, they will receive another voucher from the government to put into their fund.

Steps to Getting a Child Trust Fund

Children born after the above date are eligible to receive the CTF if they live in the UK, receive child benefit and aren't subject to immigration control. Follow these four steps, as recommended by the HM Revenue and Customs Child Trust Fund site:

• Claim child benefit This is a monthly payment which all children are entitled to, regardless of your income or savings. The amount, at the moment, is £20.30 for the first child per week, and £13.40 for every subsequent child. Once you claim, which means you will have to provide their birth certificate, your National Insurance number and details of a bank or building society account, you will get a CTF information pack and £250 voucher sent to your home address.

• Decide on an account Many types of accounts are available, but the three main ones are savings accounts, shares accounts and stakeholder ones. There are also ethical accounts, for people who don't want to invest in areas they find unethical, and Shari'a accounts, which are based on Islamic law and do not invest in firearms, alcohol, tobacco etc. It is advised that you talk to your bank or building society to decide which type is right for you.

• Get an CTF provider Many are approved to run CTF accounts. Again, talk to your bank or building society to decide which one you want, and look to see their return on investment, the fees they charge etc.

• Open the accountYou will have to get in contact with the CTF provider to do this, meaning you will have sole charge of the account until your child turns 16.

Other Key Facts

• Having a CTF will not affect any other benefits you or your children receive.
• Money cannot be taken out of the account until the child turns 18.
• Children can make decisions about the management of the cash only after they turn 16.
• A maximum of £1,200 per year can be put into a Child Trust Fund, by anybody who wants to do so.

Child Trust Funds were started by the government to ensure that all children born after the certain date specified will have a nest egg ready for them when they enter the adult world. They were also started to encourage parents to start saving for their children's future.

Nobody knows how this experiment will work since it is relatively new. It is hoped that the young adults will use the money toward building a better future for themselves, such as for their education. Some parents worry about how sensible their children will be as young adults, and fear they will squander the money they worked hard to save. Only time will tell.

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