Child Trust Funds are helping to create a culture of saving and many parents are going beyond the government scheme to set up alternative accounts, research shows.
The creation of the Child Trust Fund (CTF) has not only started a savings habit for thousands from birth but is also convincing many parents to set up a secondary savings account for their children. Parents of all babies born after September 1st 2002 have been sent a voucher by the government worth £250 (£500 for low income families) to be saved or invested on their behalf into a dedicated CTF account.
A recent survey on the issue questioned over 1,200 UK parents about CTFs and found that the government's saving initiative is inspiring over a third of parents to open an additional saving account for their child.
The figures from Family Investments' annual Index show that 36 per cent of parents have been motivated to open an additional savings account for their child since opening a CTF, depositing an average of £283 per year.
A total of 40 per cent of parents said that setting up a CTF was the first step they took to begin contributing to their child's financial future. Worryingly for some, 25 per cent of parents have not yet set up a CTF for their children. While the £250 deposit is automatically deposited after a year, this year does not yield interest and the fund is not of the parent's choice.
The most universal hope among parents for what the savings would be spent on when the child comes of age at 18 is for further or higher education, with 56 per cent hoping the savings will go towards university or college costs.
The second most prevalent hope is that the funds will go towards a first home (40 per cent) and according to Dominic Mansley, managing director of independent financial advice firm Key Financial Consultants, this could be a wise option. He said measures should be taken by parents as soon as possible to ensure that youngsters are in a position to be able to put down a sizeable deposit when they decide the time has come to buy a house of their own.
"Really, it should start almost on the date of their birth with family and friends; obviously the child trust funds are starting to address these things," he said. "But really, the sooner the better. I think we're going to see more and more assistance from families for first-time buyers if there's a continuing increase in property prices without a corresponding increase in average salaries."
When it comes to saving for a child's future there are many options open to parents with products ranging from regular savings accounts, notice accounts, instant access accounts, children's savings accounts and even premium bonds and ISAs.
Disclaimer:
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
Article Source: http://www.theukarticledirectory.co.uk/.
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