For decision makers
Over 5 million children are now benefiting from Child Trust Funds since their launch in 2005. Offering a welcome "nudge" to parents, CTFs help families to begin saving for their children. CTFs will also offer a helping hand to eighteen-year-old young adults, who will benefit from the potentially life changing opportunities that come with owning a piece of their own future.
A range of research has shown clear evidence of the many benefits the Child Trust Fund programme has already brought to British families - and will continue to bring in future.
Frequently Asked Questions
What is the financial burden on parents when their children reach 18?
The average family spends over £13,500 a year on their child between the ages 18 to 21, more than double the cost spent on them during their early teenage years. But of those families who save, one in four has savings of less than £500. With university aged children quoted as costing their families over £40,000 each, this could mean that some 4.2 million families will have significant amounts of money to find as their children reach adulthood. The Child Trust Fund provides one means for families of today's youngsters to save towards this target over the long term rather than having to find it by other means later on.
What are the levels of debt among current young people turning 18?
Levels of debt for those aged 16-34 are amongst the highest of any group. The average debt owed by an 18 year old is £5,100, whilst the average 25 year old will be in debt for £8,000. Only a small proportion of this debt is covered by a Student Loan, meaning that many of these young people will begin their post education, adult life with bank and credit card debt of over £7,000.
How successful has the Child Trust Fund been?
The CTF is the most successful saving scheme ever. At present 74% of eligible parents actively open up a CTF account for their child with a further 10% positively choosing to allow Government to do it for them - 100% of eligible children ultimately receive an account. This compares to pre-CTF equivalent family savings rates of a mere 18% and outstrips current adult ISA rates at 30% and private pension rates at 40% of the eligible population.
What would an 18-year old do with the cash?
From the age of 16, young people will have the freedom to interact with and influence their own Child Trust Fund. This involvement, combined with the fact that the main contributors to the scheme will have been their family and friends, makes it likely that an 18 year old will make responsible use of the money at maturity. These young adults will also have benefited from many years of dedicated financial education in their schools - this was a key government commitment when the Child Trust Fund was launched. The universal nature of the Child Trust Fund will have made these classes all the more powerful as the children will have had a personal connection to the lesson.
Having the fund will open up a wide range of possibilities for these young adults - they may choose to put their fund towards a university degree, the minimum cost for which has been estimated at present at almost £10,000 a year or, at the other end of the spectrum, the job they are applying for may need a drivers licence (the average cost of learning to drive is currently estimated at just under £1,000.) The cost of vocational training would fall somewhere between these two.
How many poor and middle class families would lose out?
There are approximately 3 million families with an income of less that £16,000 and a further 2 million-plus families with an income between £16,000 and £50,000 who will all suffer if the Child Trust Fund is scrapped. These are the much squeezed ‘middle earners' who want to save for their children's futures and need all the help they can to do this.
Do Child Trust Funds encourage other members of the family to help save?
Child Trust Funds not only encourage increased saving by parents, but also by aunts, uncles, grandparents, all other family members and friends. In fact one in four grandparents pay into a Child Trust Fund or savings account for their grandchildren and industry figures suggest that grandparents contribute £470 million to Child Trust Funds every year.
Do Child Trust Funds help promote savings amongst low-income families?
44% of families on low income have no savings outside of the Child Trust Fund. CTFs help these families to save their limited resources, with over 30% of low income families adding on a monthly basis to their child's Child Trust Fund.
