Family Investments welcomes government’s financial education drive

Family Investments welcomes government plans to develop a national financial advice service announced this week by Ed Balls, Economic Secretary to the Treasury.

Financial education and awareness is a key aim of the child trust fund scheme, which hopes to encourage families to take a keen interest in saving for their children to ensure they receive a significant nest egg when they reach 18.

Miles Bingham, Family Investments said: “The CTF has had a good start with almost three quarters of parents engaging with the scheme and opening accounts for their children. However, there is a still a significant proportion who wait for government to open their accounts twelve months after their CTF voucher has been issued. By waiting twelve months, parents lose a year’s growth potential on the fund and the government will choose the provider for them.”

The government’s announcement comes during CTF Week, which aims to raise awareness of the scheme, encourage parents to open CTF accounts and top them up on a regular basis. The success of the CTF scheme is becoming evident: Family’s research shows that 39% of parents who have set up a CTF are also being inspired to set up other savings vehicles as a result. This rises to 42% for those wise parents who have opened a stakeholder CTF.

By choosing a stakeholder account with Family and topping up their initial £250 voucher with the average £20 per month top up, parents could create a nest egg of worth £8,096 for their child when they reach 18, compared to £1,050 if they decide not to add to the fund. And since launch, shares based accounts have enjoyed good growth – a parent who invested one of the original £277 vouchers with Family Investments directly having received it in April 2005 and topped it up regularly with £20 per month will now have a CTF worth £813. On the other hand, where the same £277 vouchers have been left for a year and then allocated by HMRC to Family, the account is currently worth only £302.

Choosing a CTF account can be a confusing time for parents. According to research commissioned by Family Investments, of the 77% of parents who claimed to fully understand the differences between the different types of CTFs, 89% opened a stakeholder account – making stakeholder accounts the choice of savvy parents.