Child Trust Fund babies turn five and head off to school

The first children to qualify for the Child Trust Fund (CTF) are fast approaching their fifth birthday and will soon be starting a new adventure in life when the school term starts in September. For these children, their first day at school will be a big step towards building for their future and, thanks to the Child Trust Fund, they should have a sizeable nest-egg when they turn 18. However, with 60% of parents choosing not to make any contribution to their child’s fund, some children may not have very much money saved at all after 18 years.

Nationwide would like to encourage all parents to save even the smallest amount into their child’s CTF and looks to the government to do more to promote the benefits of saving. Children, whose parents invested their government voucher into a Nationwide cash or equity CTF in April 2005 and have contributed just £20 a month, will have seen the fund already grow to around £1,000. If the monthly £20 contribution continued, by the time the child reaches adulthood they could be enjoying a nest egg of as much as £35,000.

Matthew Carter, Nationwide’s savings director, said: “The Child Trust Fund is a great, tax-efficient savings vehicle for parents to build a nest egg for their children. Children who were the first to qualify are now reaching their fifth birthday and will soon be starting school. As they grow up they will see their funds grow with them and on reaching adulthood will hopefully have developed a savings habit which they will continue. However, we are disappointed that so few funds see additional top-ups because just by saving even the smallest amount, parents, family and friends can ensure that every eligible child, when they turn 18, will have a substantial amount of money saved.

“To get the most out of the Child Trust Fund parents should invest their child’s voucher early to ensure they receive the full 18 years worth of interest or investment growth that they are entitled to. Encouraging a culture of saving in children can make a real difference to their lives and by topping up their Child Trust Fund on a regular basis, parents can really help to give them a head start in life.”