COMMENT
Make Your Child Rich!

You may remember that, in the 2003 Budget, Gordon Brown offered to give every child born on or after 1st September 2002 a lump sum of £250 (and more for families on low incomes). It's called the Child Trust Fund (CTF). Although the money can't be touched until the child reaches 18 years of age, it's free from income and capital gains tax. With 700,000 babies being born each year, that's an extra £235m allocated to families!

Today the scheme is officially launched, with the first vouchers being sent out next week. You don't need to register anywhere as the vouchers are being sent out automatically for those children registered for Child Benefit. From April onwards, parents will be able use these vouchers to open an account with one of the many CTF providers.

And, as some parents have been waiting for over two years, the government are taking this into account by slightly increasing this sum for children born before April 2005.

So what should you do with it?

The best way to think about this money is as a kind of 'ISA for kids'. You have the same choices for this CTF money as you would for your own ISA – you can either save it as cash, or put it into the stock market. There is also a stakeholder option, capping annual charges at 1.5% and investing the money across a range of companies (thus spreading the risk) until your child is 13, when it is moved to lower risk investments. If you don't invest your child's voucher within 12 months, the Inland Revenue will automatically open a stakeholder account for your child.

It doesn't take a genius to realise that 15-18 years is a long time for an investment - long enough to ride out many of the ups and downs of the stock market. Over this timeframe, any growth from a savings account is likely to be eroded by charges and inflation. And, in the past, the stock market has grown by more than any savings account. This is true for every 18-year period in the last 40 years.

Just as you might do with an ISA, you should also consider this a starting point if you can, and think about putting money into your child's account each month. If you put away just the weekly child benefit money of £16.50 into your two year old's CTF stakeholder account every month until he is 18, you would end up with over £22,600 (assuming the stock market grows at 8% a year and charges are capped at 1.5%).

And, if you could put away an extra £325 a year (which works out at £27 a month), thus meeting the £1,200 maximum investment each year, you could be looking at over £33,900 when they turn 18!

So don't just rush to pay your voucher into a bank/building society account, find out more in our Saving for Children centre. Come April, we'll be looking at some of the accounts on offer in more detail, to see if they make the grade!