Child Trust Funds

Child Trust Funds are long-term savings accounts for children. You'll get a £250 voucher (poorer parents will get more) to open a child trust fund for your child - this isn't your money, you can't spend it and your kid won't be able to access it until his or her 18th birthday. There'll also be a further voucher payment into child trust funds from the government when the children concerned reach the age of seven.

However, what will make the difference to child trust funds are the savings that you may add to them. Anyone - parents, family and friends - may contribute up to a total of £1,200 a year into the account. Money invested in child trust funds will earn interest or an investment return completely free of income tax and, if invested in a stock market-linked account, free of capital gains tax too.

It is this ability to add savings to child trust funds where they may grow tax-free that makes these accounts something you should consider. Child trust funds are one of the most useful ways of saving over the long term to build up a lump sum that your child could use to help pay higher education costs or fund a deposit on a home, etc.

See also:

• Child Trust Funds - A Guide

Last Updated: April 2008 © Moneyextra.com

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