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Developing a Child Trust Fund
Developing a Trust Fund
Developing a Child Trust Fund is a wise way to ensure that your children will have a supply of money when they turn 18. It's a popular long-term investment and an attentive way to help give your child financial stability, useful for university fees and property deposits.
There are three main types of accounts: a savings account, accounts that invest in shares and a stakeholder account.
A Savings Account
An alternative to investing in stocks and shares, a savings account for your child is a sound financial move, as a lump sum to kick-start their account will increase in value over time. It's worth acknowledging that managing the account costs money, a cost that could well go unnoticed, so keep this mind as you do your research. It probably won't accumulate the same kind of value as it would if you invested in actual shares, particularly with inflation, but it's still a reliable source of money-growth, and a helping hand for your children.
Accounts Investing in Shares
This type of account will use the money put aside for your child to buy shares in companies, which increases your investment as the company grows and their own shares move up. This can usually have a greater effect on your investment than the interest trickling its way into a savings account. Long-term – which is the feature of a Child's Trust Fund - it's a good idea, as generally speaking, the stock market's value seems to raise more than it falls. Again, there are charges from your provider, so remember to check all this out before you begin.
Stakeholder Accounts
This spreads your investments over a range of companies, reducing the risk of a financial wipe-out if a company does badly. When your child gets to 13 years old, the investments start to shift to more low risk types. Your provider will decide the best way to manoeuvre the money – if shares aren't doing well, the money will be protected in more reliable investments, particularly as they get to the 18 year old mark. There is a charge to this account, but it's no more than 1.5 per cent a year.
For more background information on Child Trust Funds from childtrustfund.gov.uk, with providers like Asda Finance giving you details of their terms online, allowing you to purchase a child trust fund simple and easily over the internet. It's a steadfast way of giving your children financial freedom when they need it.
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