Child Trust Funds are the brain child of the New Labour government in the UK. They were introduced so that parents would start to save for their children's future. Any child born after Sept 2002 can obtain a 250 starter voucher to be used when they open a child trust fund. There are an estimated 25% of parents who do not open a child trust fund before their voucher expires (to note the money automatically gets put into a stakeholder child trust fund by the government should the voucher recipient not put it into a fund). The total of lost interest currently stands at over 10,000,000 per year! That's approximately 80,000,000 in lost interest over the past 8 years. Part of the reason why this is such a high proportion of parents not using their voucher can be attributed to the range of types of funds available and the staggering amount of trust providers.
To clarify the basics there are three (3) main types of Child Trust Fund.
1. Cash Child Trust Funds
2. StakeHolder Child Trust Funds
3. Share Child Trust Funds
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Cash Child Trust Fund is a simple savings account with a fixed interest. While the profit accumulated might not get your heart racing it is inherently a very safe way to invest the voucher and your money for your child trust fund.
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Stakeholder Child Trust Fund is where the money is invested in a range of shares. There are strict guidelines on what types of shares that the fund providers can invest in so it is less risky than just having one share type with all the money invested in it.
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Share Child Trust Fund is typically that the investment is in shares.
These are the main types of Child Trust Funds and within each of these you can find Ethical child trust funds and also Sharia Child Trust Funds so there is plenty of choice to fit your needs.
As stated before there are a multitude of different child trust fund products on the market and to help you
compare child trust funds there are a few sites on the web that make a good job of comparing child trust funds.
Hopefully you have learnt some helpful information on child trust funds and can start to make a more informed decision on which child trust fund that will be suitable for your child.
