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In our last issue, we
looked at the government's Child Trust Fund, Child Tax Credit
and Working Tax Credit initiatives. This month, we see how you can make the most of the
money that you're entitled to receive. Now that every child born on or after 1st
September 2002 is entitled to a Child Trust Fund voucher
worth at least £250, it's important that you know how you can put the money to good use.
The first thing you need to do to take full advantage of the initiative is to open a Child Trust
Fund account. But with a range of companies offering specialist accounts, including high-street banks,
investment companies and building societies, the choices can be overwhelming. Before you open an account
you will need to decide whether you would like to invest in a savings account, a shares-based account
or a stakeholder account. But remember, it's a good idea to figure out what your attitude to risk is
before you make any big decisions.
- Savings account - definitely considered to be the safe option. While it will certainly suit the more risk-averse individual, parents should remember that this low-risk approach offered by banks and building societies may not offer the highest interest rates.
- Shares-based account - if you're looking to be a bit more adventurous with your money, this is the one for you. While some parents may be worried about putting their children's cash on the stock market, investing the money in shares may offer a better return than savings accounts.
- Stakeholder account - a kind of compromise between safe and adventurous. This approach ensures that any money invested in shares is gradually moved in to more secure investments after your child's 13th birthday.
Whether your child is eligible for a Child Trust Fund voucher or not, you'll still be keen to ensure
their financial security in the future. By making an investment early on, you can make sure that your
children will always be provided for. Contacting a financial advisor could be the answer, but in the
meantime, we’ve got some handy investment suggestions.
We all know how expensive children can be so there's often very little cash lying around.
But it doesn't take much to build a nest egg. Even as little as £10 a month will become a tidy sum
in 20 years. Whether you choose to invest your child's money in a bank or building society account,
or in shares, the security it brings is invaluable.
If you want to invest in shares or a fund, there's plenty of options out there. You could save
your money and buy individual shares in your child's name or invest a regular sum of money in a
share-based fund or index tracker.
As well as looking at friendly societies,
which offer tax-free savings for children, you might want to think about opening a pension in your child's name.
If you put £2808, the current maximum, into your child's pension each year, the Chancellor will top it up to
£3,600 at no extra charge.
If you're looking for further advice on how to give your child that all-important leg up, have a look
at our further resources.
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