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Question of the week: child trust funds
Former_MSE_Alana
Posts: 252 Forumite
Q. In 2005 it was suggested that I put £500 my daughter received through the Child Trust Fund scheme into share saver account. Since the recession the account has obviously lost. It is now worth LESS than the original amount given to me. Would you suggest I leave it where it is or move it to a normal savers account? Bina Campbell, by email
A. The government gives all families with new born children a £250 or £500 voucher to put into a Child Trust Fund (CTF), see the Child Trust Fund guide then there'll be another voucher at age 7. The choice is simple you can either save it, and get an interest rate, or invest it in shares, which means the amount can go up or down - I'm not sure who made the suggestion to you, but they should've explained that.
Over the long run, historically shares have outperformed savings accounts, but there are never any guarantees. You chose the riskier route and currently it hasn't worked, yet that doesn't mean by the time your daughter cashes it in age 18 it won't have bounced back - it's only then that it matters - the current loss is just on paper. Do note you CAN'T withdraw the money and put it in a normal savings acount, firstly it's your daughters not yours, secondly it can't be removed until she's older.
As no one knows what'll happen to the market, the decision is all about risk. If you want to just play very safe, transfer the money to a CTF savings account (see top CTF accounts) and you’ll just get the interest rate stated.
However, the money you’ve already lost will be gone for good, as that’s the risk you took placing the money in shares. If you want to hope that'll bounce back, but risk further losses then stick with an investment type CTF (though you could change exactly what it's invested in).
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A. The government gives all families with new born children a £250 or £500 voucher to put into a Child Trust Fund (CTF), see the Child Trust Fund guide then there'll be another voucher at age 7. The choice is simple you can either save it, and get an interest rate, or invest it in shares, which means the amount can go up or down - I'm not sure who made the suggestion to you, but they should've explained that.
Over the long run, historically shares have outperformed savings accounts, but there are never any guarantees. You chose the riskier route and currently it hasn't worked, yet that doesn't mean by the time your daughter cashes it in age 18 it won't have bounced back - it's only then that it matters - the current loss is just on paper. Do note you CAN'T withdraw the money and put it in a normal savings acount, firstly it's your daughters not yours, secondly it can't be removed until she's older.
As no one knows what'll happen to the market, the decision is all about risk. If you want to just play very safe, transfer the money to a CTF savings account (see top CTF accounts) and you’ll just get the interest rate stated.
However, the money you’ve already lost will be gone for good, as that’s the risk you took placing the money in shares. If you want to hope that'll bounce back, but risk further losses then stick with an investment type CTF (though you could change exactly what it's invested in).
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Comments
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i didnt realise untill now we had the option of it going into a CTF savings account
i just thought it had to go to shares(and of course its lost money in 2 years!!)
this wasnt explained to me
i think this needs to be made even more public, or am i the only one who didnt know this?!I am not bossy I just have better ideas:p0 -
Bubbles - To be fair to the Govt and all the providers, the info is plastered on everything to do with a CTF!0
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:wall:
:wall:bubbles0169 wrote: »i didnt realise untill now we had the option of it going into a CTF savings account
i just thought it had to go to shares(and of course its lost money in 2 years!!)
this wasnt explained to me
i think this needs to be made even more public, or am i the only one who didnt know this?!Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
I had very little time in which to invest the voucher and as was one of the first few to receive the vouchers had just 2 viable options (I found out 3 places only which had their "act" together). However the government literate was very clear about stakeholder / stock & shares / cash CTF differences IMO.
The trust fund I invested in reverts to a reduce risk option after my child's 13th Birthday.
I have been fortunate that it gained interest & then has lost the interest but the original amount invested is still there.0
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