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Titled: Everything you need to know about Child Trust Funds Get the Mutual Funds category RSS Feed

Everything you need to know about Child Trust Funds

Article Summary: The Child Trust Fund is a new scheme that guarentees great tax-free savings for your child.

If you're the parent of a child born after 1st September 2002 you'll probably already have at least a vague notion of what a Child Trust Fund is and for soon to be parents it's something well worth acquainting yourself with. Basically CTFs are part of a new government initiated scheme aimed at providing a tax-free saving opportunity for kids. Every new born baby will receive £250 (£500 for low income families), to be invested until the child turns 18.

Whilst this in all likelihood won't generate a huge sum on its own (given an estimated 7% growth each year the full £500 investment would be worth £1,410) there is also the potential for family and friends to contribute up to a further £1,200 a year. Any income arising from these contributions will be tax free. There is certainly the potential then to generate a decent sized sum. The scheme should therefore open up the possibility of building significant savings for their child to a wider demographic than might previously have been the case. This should mean many more kids get a welcome lump sum that might, for instance, contribute to further education costs, a first car or even travel.

CTF's are designed to be as simple and transparent as possible for parents. First up a voucher will arrive from the government, there's no responsibility placed on the parent to make an application. It's then down to you to decide how you want to invest it although there will be limitations – nothing too high risk essentially. Even if you fail to invest after a year HM Revenue and customs will do it for you, after which point parents are free to assume responsibility for the account. In addition the government will even contribute another £250 (again, twice as much for low income families) when the child reaches the age of 7.

Aside from being a useful savings tool for future generations and especially those children who may not otherwise have had anything set aside it's also being plugged as a scheme aimed at financial education. Giving kids a potentially valuable experience of real money management seems to have been one of the key motivations behind the idea with children set to receive relevant financial advice and education leading up to the point at which they are permitted access to the money. Perhaps the aim is to help go someway towards instilling a saving habit that might counterbalance an increasingly ‘buy now, forget about the consequences' culture.


Copyright (c) 2007 Jay Smith

Article Source: http://www.upublish.info

About the Author:
Jay Smith
Give your child a head start by saving for their future with an ASDA Child Trust Fund, a name you know and trust.