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MONEY COMMENT
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According to recent research from the Association of Investment Trust Companies (AITC), three out of five parents and grandparents (62%) haven't heard of the new Child Trust Fund (CTF). This is the government's attempt to give children a better financial start in life, and also encourage parents to save for their children's future. From next April, the government will give £250 to all children born after 31 August 2002. This gift doubles to £500 for families with an income below the Child Tax Credit threshold (the current limit is an annual income of £13,480). There will also be a top-up payment at age seven. Only three out of ten low-earning parents (30%) know of the scheme, but even high-earning parents are in the dark, with only four out of nine (45%) aware of the CTF, according to the AITC. Sadly, only one of my darlings is entitled to the government's CTF payment. My son was born in 2001, so he's not entitled to the £250 handout, nor can we open a CTF for him. Boo! However, my daughter was born last year, so she will get her £250 voucher from Gordon Brown. These vouchers will be sent to whichever parent is claiming Child Benefit, starting from next January. Nevertheless, thanks to generous relatives, my son hasn't done too badly. In fact, he already has more money stashed away than I had at any point until my early thirties! Nevertheless, I'm excited about the launch of the CTF, because it makes saving and investing for my daughter that much easier. Parents, other relatives and friends can pay into a CTF (up to £1,200 a year) and the entire pot will grow free of income tax and capital gains tax. This money can be invested in a range of funds – although I'll aim for a 100% stock-market product for little Miss D. This money will belong to her and she can access it when she reaches eighteen, by which point she should be Foolish enough not to blow it all in one go! Even saving a little each month into a CTF could be very rewarding. Growth of, say, 9% a year for eighteen years will turn the government's £250 into a respectable £1,179. However, paying in an extra £25 a month for eighteen years, again with annual growth of 9%, would produce a further £12,986, giving a total payout of £14,165. Tasty! So, come on mums and dads, start spreading the word. Next time you get together with other parents for coffee or a pint, or meet in the nursery or your local park, start spreading the word about the Child Trust Fund. At the very least, other parents will be impressed at your financial savvy! More: Inland Revenue guide to the Child Trust Fund | Visit our Saving For Children centre.