Long-term saving for children has been revolutionised since the introduction 5 years ago of the Child Trust Fund. So claims the Children's Mutual, a leading Child Trust Fund provider.
In the five years since they were introduced, 2010 will see more than 5 million children having a Child Trust Fund account. Anyone born on or after September 1st 2002 will have automatically have received a voucher worth at least £250 to be invested until they are 18 by their parents. Children from lower income families will have received a £500 voucher. All children reaching the age of 7 also
receive a further voucher worth £250 or £500.
In making their claim, the Children's Mutual point to the fact that over half of all parents opening a Child Trust Fund with them have also taken out a monthly direct debit on the same day to increase the amount saved. Up to £100 per month can be saved on a regular basis and no more that £1,200 can be added in a full year. On a broader scale, 31% of all Child Trust Funds receive additional contributions from parents, family or friends.
Before the introduction of Child Trust Funds just 1 in 5 parents were saving for the long term financial future of their offspring.
Although parents can chose where to invest the vouchers, nearly 1 in 10 allow the government to make that option under the default provisions. But 75% do make a positive choice in the first year and get the funds working hard in an account of their choosing. That means that around 85% of all parents were making a choice of where to invest – compared with a take up rate of just 30% on ISA's and 40% for pensions products.
Around £22m is being added by parents to the Child Trust Fund accounts each month. The Children's Mutual estimates that this will generate around £2.74 billion by the time the children reach 18. They also show that around 50% of the government funding for Child Trust Funds is also reaching the 1.5 million lowest income families.
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