Background information
The possible costs of the life events in 18 years time are based on the sources below, and assume growth at an inflation rate of 2.5% a year, but make no allowance for past inflation since the source date shown. Although inflation is currently higher than this, we believe this figure is a reasonable expectation over the full 18 year period.
Please remember that because Child Trust Fund investment is often linked to shares, the value of the account could fall as well as rise, and your child may get back less than has been invested.
The suggested monthly payment amount:
- assumes that such sums paid into the account will grow at 7% a year, and that total charges will be 1.5% of the account's value each year
- assumes it's possible to make monthly payments for a full 18 years - if there's less than 18 years to go until your child's 18th birthday, you could need to pay in more than shown here
- takes into account Government contributions of £250 each at outset and age 7
- is an example only, and payment at this rate does not guarantee the target amount will be achieved. Your child could get back more or less than your chosen target amount. Don't forget that inflation would reduce what your child could buy with the amount they receive at 18.
£100 a month is the most you can pay into your child's CTF account. So, if you're aiming to cover the full cost of university, you'll almost certainly need to save some extra money as well.
Source information
Foreign holiday - based on a foreign trip valued at around £2500 and assuming inflation at 2.5% a year for 18 years. (Sept '09)
University - based on the current maximum tuition fees of £3,225 per year, for three years of study, adjusted for inflation at an assumed rate of 2.5% a year for 18 years, but not allowing for any possible increase in tuition fees prior to the course starting. (Sept '09)
First car - www.whatcar.co.uk e.g Daihatsu Sirion, Fiat Panda and Citroen C2, today's cost of £8,320 assuming inflation at 2.5% a year for 18 years (Sep '09)
First home - based on a 10% deposit. House price index from www.nationwide.co.uk indicates that the average house price for First Time Buyers across the UK is £133,611 assuming inflation at 2.5% a year for 18 years (Sept '09).
Wedding - £19,265 according to the You & Your Wedding Magazine (Dec '09 www.youandyourwedding.co.uk) assuming inflation is at 2.5% a year for 18 years (Sept '09).
Business - the median start-up money required by UK Entrepreneurs today is £10,000 (Global Entrepreneurship Monitor Oct '09) assuming inflation is at 2.5% a year for 18 years. (Sept '09)
