FOOL'S EYE VIEW
Prudence Is A Virtue – For Some!

By Jane Mack (TMFJane)
December 10, 2001

I'm not usually given to gambling but I couldn't resist making a little bet with my husband the other day about what name the Chancellor of the Exchequer will give his forthcoming child. As we all know by now the lovely Gordon Brown is soon to become a Dad and I was idly wondering whether, if it was a girl, he might call her Prudence. It's his favourite word, after all!

As it happens, my husband didn't think the Chancellor has that great a sense of humour but I reckon he does - and so did the betting company, Ladbrokes, when I rang them to find out if they were offering odds on Baby Brown's likely name. At the moment they're not but they thought the idea funny enough to consider it so you never know. And 'Prudence Brown' does have a certain ring to it, don't you think?

Anyway, whatever he calls his offspring, the birth will come too early for the Chancellor's baby to benefit from the Child Trust Fund that he's planning to introduce. In case you've forgotten, back in March Gorgeous Gordon announced a rather radical plan to give children a financial start in life. Further details were released last month when he gave his Pre-Budget speech to the House of Commons so we've now got more of an idea of how the scheme might work.

It'll be another couple of years or so before it's up and running because the Government is still in consultation mode at the moment, and it won't apply to children born before implementation, hence the reason for the Chancellor missing his own boat. Nevertheless, if you're willing to hold off starting or increasing the size of your own family for a while then this is what you've got to look forward to:

Current proposals are that each newborn will be given an endowment, probably of around £500, at birth followed by further top-ups at ages 5, 11 and 16. Relatives and friends as well as the child himself, will be able to make tax-free contributions to the fund up to a limit of £1,000 a year per account and the money will be invested in equities and the usual sort of savings account. No access to the funds will be permitted until the child reaches 18 so once the contributions have been made, they're locked in for the lifetime of the fund. Like the ISA, growth in the fund will be exempt from tax.

The mechanics of the scheme will be taught in the classroom via the National Curriculum so that by the time the matured fund is handed over to the child at the age of 18, he has, in theory, got some idea of what to do with it. Personally I think that's probably a bit young but I suppose if the message is drummed home hard enough in schools then there shouldn't be too many youngsters blowing the lot the day after their 18th birthday.

The idea of the scheme is, of course, to encourage children to save and to give them some sort of financial security as well as a good start in life.

It's a good idea – especially as children will be taught financial literacy along the way. But it seems a tad unfair that children born before implementation of the scheme, including the Chancellor's own child, should miss out. Perhaps Mr Brown could consider allowing these children to have some sort of Child ISA run along similar lines to the Child Trust Fund. Even if the Government doesn't contribute to it, at least family and friends could. After all, today's children need to discover Prudence too.

More information: Child Trust Fund | Investing For Children