At a glance

  • The oldest holders of child trust funds (CTFs) turned 18 in September, giving them access to their savings for the first time
  • Around 1.8 million CTFs remain unclaimed – representing an untapped windfall for children all over the UK
  • Child savings products offer an ideal basis for parents to work with their children on setting financial goals and getting into a savings habit

At a glance

  • The oldest holders of child trust funds (CTFs) turned 18 in September, giving them access to their savings for the first time
  • Around 1.8 million CTFs remain unclaimed – representing an untapped windfall for children all over the UK
  • Child savings products offer an ideal basis for parents to work with their children on setting financial goals and getting into a savings habit

At a glance

  • The oldest holders of child trust funds (CTFs) turned 18 in September, giving them access to their savings for the first time
  • Around 1.8 million CTFs remain unclaimed – representing an untapped windfall for children all over the UK
  • Child savings products offer an ideal basis for parents to work with their children on setting financial goals and getting into a savings habit

There was some much-needed good news for thousands of 18-year olds in September - thanks to savings that many didn’t know they had.

That was when the first windfalls from Child Trust Funds (CTFs) became available, with more than 50,000 teenagers a month1 now becoming entitled to money held in accounts opened for them several years ago.

CTFs, a tax-free savings product for children, were launched in 2005 to encourage long-term saving, with parents given vouchers worth £250 (£500 for low-income families) to open them with, and HM Revenue & Customs (HMRC) automatically opening accounts for eligible children when parents hadn’t done so.

Cash CTFs worked in a very similar way to Cash ISAs, but by 2011 interest rates on them had fallen and charges for investments were relatively high; they were replaced in that year by Junior ISAs. The first holders of the CTF accounts turned 18 in September, gaining access to the funds held in them. Many will have doubtless marked their milestone birthday feeling grateful for child savings accounts and for the financial head start they provided.

It also serves as a reminder for parents and grandparents of the benefits of getting children into a savings habit from an early age.

So, here we look at some of the questions you might have about child savings and getting children interested in their financial future.

How can I find a Child Trust Fund?

Many thousands of CTFs were set up without any further action taken on them, while around 1.8 million CTFs have been lost or forgotten about2. That amounts to very significant sums of money that kids are entitled to but won’t currently be getting.

If you think a CTF may have been opened in your child’s name but you don’t know the provider, the government website can help you find it. You will have to log in to your Government Gateway account (or sign up for one, if you don’t have one) and provide your child’s Unique Reference Number and their National Insurance number. Once you’ve answered some fairly straightforward questions, HMRC will send you details of your CTF provider.

“Once you’ve tracked down the CTF, you can start having a conversation with the child about what they’re saving towards or what they would spend it on,” says Harriet Shepherd, Workplace Financial Education Project Manager at St. James's Place Wealth Management.

Does the ‘compound effect’ make that much difference?

The ‘snowball’ effect of compounding means that the earlier you start saving, the better your chances of building up a significant sum of money.

Compounding is what happens when the money generated by savings (i.e. interest) or investments (i.e. dividends) is added to the savings fund, rather than being used elsewhere, not only increasing the fund but also increasing the earnings generated by it. So, the sooner you start, the more your child or children will benefit, no matter how much or how little you’re setting aside each month.

“You are beginning to give them an idea of money being put away so that they can buy something bigger with it later on,” says Shepherd. “Those habits are really important.”

My kids aren’t interested in financial education. How can I engage them?

Parents could use particular pots, such as savings accounts and piggy banks, as an opportunity to reinforce the value of saving and kick-start their financial education, says Shepherd.

“Discuss financial goal-setting with your child, helping them to visualise why they are saving, from writing on the side of a piggy bank what they are saving for, to saving into a Junior ISA [a savings account whose earnings are free from income tax and capital gains tax] or other savings account to achieve a goal.”

“Early on it’s about building up the rationale behind saving, such as the toy or game they want to buy with their money, while the goals for older children might be to buy their first car or save up for a holiday.

“At around 15 you might start thinking about university, so you already have an eye on what you want in your future,” Shepherd points out. “The minute you can home in on that, you have the opportunity to bring savings into the conversation.”

What products are available for child savings now?

The main option is Junior ISAs. Up to £9,000 can be paid in for each child in the current tax year, with the money invested in cash, stocks and shares or both. The child can make decisions (such as transferring provider) about the account from age 16, and they can access it once they turn 18. At this point the account automatically rolls over into an adult ISA, allowing up to £20,000 be saved in each tax year, and which the account holder can access at any time (based on 2020/2021 tax year). “It’s all about how parents bring the children into it rather than just doing it on their behalf,” says Shepherd.

Debit cards and other traditional savings accounts also have a role to play, while other options, looking further into the future, include children’s pensions and the investment schemes offered by investment companies.

There was some much-needed good news for thousands of 18-year olds in September - thanks to savings that many didn’t know they had.

That was when the first windfalls from Child Trust Funds (CTFs) became available, with more than 50,000 teenagers a month1 now becoming entitled to money held in accounts opened for them several years ago.

CTFs, a tax-free savings product for children, were launched in 2005 to encourage long-term saving, with parents given vouchers worth £250 (£500 for low-income families) to open them with, and HM Revenue & Customs (HMRC) automatically opening accounts for eligible children when parents hadn’t done so.

Cash CTFs worked in a very similar way to Cash ISAs, but by 2011 interest rates on them had fallen and charges for investments were relatively high; they were replaced in that year by Junior ISAs. The first holders of the CTF accounts turned 18 in September, gaining access to the funds held in them. Many will have doubtless marked their milestone birthday feeling grateful for child savings accounts and for the financial head start they provided.

It also serves as a reminder for parents and grandparents of the benefits of getting children into a savings habit from an early age.

So, here we look at some of the questions you might have about child savings and getting children interested in their financial future.

How can I find a Child Trust Fund?

Many thousands of CTFs were set up without any further action taken on them, while around 1.8 million CTFs have been lost or forgotten about2. That amounts to very significant sums of money that kids are entitled to but won’t currently be getting.

If you think a CTF may have been opened in your child’s name but you don’t know the provider, the government website can help you find it. You will have to log in to your Government Gateway account (or sign up for one, if you don’t have one) and provide your child’s Unique Reference Number and their National Insurance number. Once you’ve answered some fairly straightforward questions, HMRC will send you details of your CTF provider.

“Once you’ve tracked down the CTF, you can start having a conversation with the child about what they’re saving towards or what they would spend it on,” says Harriet Shepherd, Workplace Financial Education Project Manager at St. James's Place Wealth Management.

Does the ‘compound effect’ make that much difference?

The ‘snowball’ effect of compounding means that the earlier you start saving, the better your chances of building up a significant sum of money.

Compounding is what happens when the money generated by savings (i.e. interest) or investments (i.e. dividends) is added to the savings fund, rather than being used elsewhere, not only increasing the fund but also increasing the earnings generated by it. So, the sooner you start, the more your child or children will benefit, no matter how much or how little you’re setting aside each month.

“You are beginning to give them an idea of money being put away so that they can buy something bigger with it later on,” says Shepherd. “Those habits are really important.”

My kids aren’t interested in financial education. How can I engage them?

Parents could use particular pots, such as savings accounts and piggy banks, as an opportunity to reinforce the value of saving and kick-start their financial education, says Shepherd.

“Discuss financial goal-setting with your child, helping them to visualise why they are saving, from writing on the side of a piggy bank what they are saving for, to saving into a Junior ISA [a savings account whose earnings are free from income tax and capital gains tax] or other savings account to achieve a goal.”

“Early on it’s about building up the rationale behind saving, such as the toy or game they want to buy with their money, while the goals for older children might be to buy their first car or save up for a holiday.

“At around 15 you might start thinking about university, so you already have an eye on what you want in your future,” Shepherd points out. “The minute you can home in on that, you have the opportunity to bring savings into the conversation.”

What products are available for child savings now?

The main option is Junior ISAs. Up to £9,000 can be paid in for each child in the current tax year, with the money invested in cash, stocks and shares or both. The child can make decisions (such as transferring provider) about the account from age 16, and they can access it once they turn 18. At this point the account automatically rolls over into an adult ISA, allowing up to £20,000 be saved in each tax year, and which the account holder can access at any time (based on 2020/2021 tax year). “It’s all about how parents bring the children into it rather than just doing it on their behalf,” says Shepherd.

Debit cards and other traditional savings accounts also have a role to play, while other options, looking further into the future, include children’s pensions and the investment schemes offered by investment companies.

There was some much-needed good news for thousands of 18-year olds in September - thanks to savings that many didn’t know they had.

That was when the first windfalls from Child Trust Funds (CTFs) became available, with more than 50,000 teenagers a month1 now becoming entitled to money held in accounts opened for them several years ago.

CTFs, a tax-free savings product for children, were launched in 2005 to encourage long-term saving, with parents given vouchers worth £250 (£500 for low-income families) to open them with, and HM Revenue & Customs (HMRC) automatically opening accounts for eligible children when parents hadn’t done so.

Cash CTFs worked in a very similar way to Cash ISAs, but by 2011 interest rates on them had fallen and charges for investments were relatively high; they were replaced in that year by Junior ISAs. The first holders of the CTF accounts turned 18 in September, gaining access to the funds held in them. Many will have doubtless marked their milestone birthday feeling grateful for child savings accounts and for the financial head start they provided.

It also serves as a reminder for parents and grandparents of the benefits of getting children into a savings habit from an early age.

So, here we look at some of the questions you might have about child savings and getting children interested in their financial future.

How can I find a Child Trust Fund?

Many thousands of CTFs were set up without any further action taken on them, while around 1.8 million CTFs have been lost or forgotten about2. That amounts to very significant sums of money that kids are entitled to but won’t currently be getting.

If you think a CTF may have been opened in your child’s name but you don’t know the provider, the government website can help you find it. You will have to log in to your Government Gateway account (or sign up for one, if you don’t have one) and provide your child’s Unique Reference Number and their National Insurance number. Once you’ve answered some fairly straightforward questions, HMRC will send you details of your CTF provider.

“Once you’ve tracked down the CTF, you can start having a conversation with the child about what they’re saving towards or what they would spend it on,” says Harriet Shepherd, Workplace Financial Education Project Manager at St. James's Place Wealth Management.

Does the ‘compound effect’ make that much difference?

The ‘snowball’ effect of compounding means that the earlier you start saving, the better your chances of building up a significant sum of money.

Compounding is what happens when the money generated by savings (i.e. interest) or investments (i.e. dividends) is added to the savings fund, rather than being used elsewhere, not only increasing the fund but also increasing the earnings generated by it. So, the sooner you start, the more your child or children will benefit, no matter how much or how little you’re setting aside each month.

“You are beginning to give them an idea of money being put away so that they can buy something bigger with it later on,” says Shepherd. “Those habits are really important.”

My kids aren’t interested in financial education. How can I engage them?

Parents could use particular pots, such as savings accounts and piggy banks, as an opportunity to reinforce the value of saving and kick-start their financial education, says Shepherd.

“Discuss financial goal-setting with your child, helping them to visualise why they are saving, from writing on the side of a piggy bank what they are saving for, to saving into a Junior ISA [a savings account whose earnings are free from income tax and capital gains tax] or other savings account to achieve a goal.”

“Early on it’s about building up the rationale behind saving, such as the toy or game they want to buy with their money, while the goals for older children might be to buy their first car or save up for a holiday.

“At around 15 you might start thinking about university, so you already have an eye on what you want in your future,” Shepherd points out. “The minute you can home in on that, you have the opportunity to bring savings into the conversation.”

What products are available for child savings now?

The main option is Junior ISAs. Up to £9,000 can be paid in for each child in the current tax year, with the money invested in cash, stocks and shares or both. The child can make decisions (such as transferring provider) about the account from age 16, and they can access it once they turn 18. At this point the account automatically rolls over into an adult ISA, allowing up to £20,000 be saved in each tax year, and which the account holder can access at any time (based on 2020/2021 tax year). “It’s all about how parents bring the children into it rather than just doing it on their behalf,” says Shepherd.

Debit cards and other traditional savings accounts also have a role to play, while other options, looking further into the future, include children’s pensions and the investment schemes offered by investment companies.

References

1, 2. https://www.gov.uk/government/news/teenagers-to-get-access-to-child-trust-funds-for-first-time

References

1, 2. https://www.gov.uk/government/news/teenagers-to-get-access-to-child-trust-funds-for-first-time

References

1, 2. https://www.gov.uk/government/news/teenagers-to-get-access-to-child-trust-funds-for-first-time

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