October has seen the strongest rise yet in the number of new Child Trust Fund accounts being opened by parents. Figures released by leading provider, the Children's Mutual, also show that a record number of direct debuts have also been set up this year in order to make regular additional payments into their child's account.
David White, chief executive of the Children's Fund, says that with half of all customers making additional contributions from the birth of their child then they could produce a fund of £9,750. This is based on the average monthly contribution being just £24. Parents, family or friends can add a maximum of £100 to the Child Trust Fund or a maximum of £1,200 per year based on regular and ad hoc contributions.
The release of Child Trust Fund statistics comes at the same time as the government confirms that 74% of all parents open up a Child Trust Fund account in the first year of their child's life. If no account has been opened by the parents in the first year the Treasury automatically invest the initial voucher worth £250 (or £500 for children from low income families) into a stakeholder type account linked to shares and bonds in the early years. In addition to the voucher at birth, the child will receive a further £250 (£500) on their 7th birthday. With a wide range of options available for investment, parents are urged to act quickly to get their funds working for the long term. Accounts cannot be accessed by the child until they reach their 18th birthday but fund managers and the type of account held can be easily changed through the life of the Child Trust Fund.
The news shows that parents are more proactive with savings for their children than for themselves. Just 40% have invested in a private pension and 30% have opened an ISA in the past.
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