Have you ever taken your winter coat out of storage, only to find a long-forgotten £10 note in the pocket?
It’s a nice moment.
But imagine finding out that your child has a potential £1,000 in a dormant savings account.
With an estimated 900,000 forgotten Child Trust Funds (CTF), discovering a lost treasure could be more likely than you think.
What is a CTF?
CTFs were introduced in 2005 and automatically assigned to all children born between 1st September 2002 and 1st January 2011.
When the scheme began, every eligible child received government vouchers at certain intervals:
- £250 when opened, with an additional £250 for low-income families
- £250 when the child turned seven
These could be deposited into cash accounts or the child’s CTF. Family and friends also had the option to add funds to the child’s account, up to the annual limit for that year (much like today’s Junior ISAs).
In 2010, the initial voucher was reduced to £50 and the seven-year top-up payment was removed altogether.
In 2011, CTFs were replaced by Junior ISAs (JISAs) and in 2015, it became possible to transfer CTF balances into JISAs.
Your next steps
If you think that your child may have a dormant CTF, you will need to locate it. If you have the relevant paperwork, you can contact the provider directly. However, don’t worry if you’re not sure, as the Government website has a tool for finding lost CTFs.
What you do with it after you find it is up to you.
You may choose to transfer the funds into a JISA for your child. Like any ISA product, you can continue to make deposits into the JISA. The current annual allowance is £4,128 and is set to rise to £4,260 in April.
You may also wish to keep the money in the account, and make top-up deposits each year. The annual JISA and CTF limits are the same.
What can the fund be used for?
Both CTFs and JISAs are used to save money on behalf of people who are under the age of 18. When they reach this age, they will have full access to the money saved and can use it in any way they see fit.
Your child’s future is likely to involve many expensive aims, such as:
- Going to university
- Buying a car
- Getting married
- Buying a house
At least two of which often require years of saving, financial planning and sometimes, putting plans on hold for longer than is ideal. By getting into the habit of saving early in life, you could be benefitting your kids in two ways:
- Ensuring that they have some money to help them during early adult life
- Instilling the importance of financial responsibility and planning for the future
Developing good habits early in life
Research from the Financial Conduct Authority shows that less than half (48%) of UK adults aged 18-24 are financially resilient, whilst 11% face financial difficulties and 41% describe themselves as ‘surviving’.
By implementing good financial habits from a young age, you can help your child to:
- Understand how money works
- Set up useful habits which will last a lifetime
- Improve maths skills
- Encourage financial discipline
- Make sure that your child understands why good financial discipline is important
To discuss your child’s savings and any decisions you need to make on their behalf, contact Sarah or Bev on 0115 9338433.