A Child Trust Fund is a savings account for children in the United Kingdom, usually meant to be a long term investment. This Child Trust Fund was introduced by the United Kingdom government in an effort to ensure that all UK children have a savings account by the time they are 18.
This was also done in the effort to teach children the benefits of saving to help them understand and implement personal finance at a young age. Any child born on or after 1 September 2002 qualifies.
Any child born in the United Kingdom is given credit in their Child Trust Fund for £250. Then, when they turn 7, an additional £250 is added to the account, however, in order to be eligible, the annual family income of the home where the child lives must be below £15,575.
Relatives and friends can contribute to these savings accounts as well over the years until it matures, of up to £1200 a year. These Child trust funds can also be tax free in certain cases.
Until a child is the age of 16, their trust funds are managed by their legal parent or guardian. Once they reach the age of 16, they have the option to take control of their account, however, no money can be withdrawn from the account until the child is 18 years of age.
After control is taken of the account, the child is free to make decisions on investments and such for the account. Though the money cannot be cashed yet, it still can be bartered to make better interest.
When children reach the age of 18, they are free to keep the account intact, managing investments and such, or they may withdraw or transfer the funds to an alternative account with better interest bearings for example into an ISA.
The rules on child trust funds tend not to change but a full set can be found at their web site – Child Trust Fund Offical Site.
The benefits of child trust funds are clear. They are a good way to teach a child better management and investment with money. They are also good ways to save money for the life of the child after he or she comes of age. Overall, it is simply a smart investment.
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