Savings And Trust Funds
What is a child trust fund?
A child trust fund is a savings and investment account for children. Child trust funds were established by the government for any child born on or after 1 September 2002. The government pays a voucher of £250 into a child trust fund, and then they pay another £250 into the fund when the child reaches age seven. The money remains invested for the child until they reach 18 years of age.
How do I set up a trust fund for my child?
Setting up a child trust fund for your child is very straightforward. Shortly after they are born, you will receive an open voucher in the post from the government. All you need to do is send that voucher off to your selected child trust fund provider, and they will open an account on your behalf.
How do I select a child trust fund provider?
There are lots of ways of going about selecting a child trust fund provider and there's two main accounts to look for. One is called a stakeholder child trust fund, and the other is a non-stakeholder child trust fund. The only differences between these two types of child trust fund accounts are the maximum charges they impose and the range of investment funds. The best way to look for a whole list of child trust funds that are available on the open market is the government's child trust fund website, which is www.childtrustfund.gov.uk.
How will my child benefit from a trust fund?
Your child will benefit from a child trust fund because it's an asset that they own in their own name. They're not able to access the child trust fund until they reach their 18th birthday. Until then, it remains completely in their own name and, as a parent, you're not able to access it.
Is it compulsory to set up a child trust fund?
It is not compulsory to open a child trust fund account, but as you receive essentially free money from the government in the form of this £250 voucher, it makes sense to do so. If within a year of receiving the voucher you do not open a trust fund account of your own choosing, you will have one opened on your behalf anyway, so that money will get invested but not until a year after the voucher is issued.
What is child tax credit?
Child tax credit is a means-tested benefit for parents or carers of children who are still in full-time education.
Who is eligible for child tax credit?
The eligibility for a child tax credit depends on your family and your household income, as it's a means tested benefit. Generally speaking, if you've got a household income of less than £58,175 per annum, you will be eligible. In the first year that your child is born, you need to have household income of less than £66,350 to be eligible for child tax credit.
How much child tax benefit will I get?
The amount of child tax benefit that you receive depends on a number of factors, including your household income and the number of children. The maximum you're likely to receive is £2,390 per year for the 2007/2008 tax year.
How will I benefit from child tax credit?
You will benefit from child tax credit in two parts. The first element, which is the family element, is worth up to £545 per year. The second element of child tax credit, which is the child element, is worth up to £1845 per year per child.
What is working tax credit?
Working tax credit is a way of topping up the income of people who are on a low income. That can mean income from employment, or self-employment. The level of working tax credit you get will depend on a number of factors, including the number of hours you work and how much you earn.
Who is eligible for working tax credit?
To be eligible for working tax credit you need to be 25 years old or older and you need to work for minimum of 30 hours each week.
What is a premium bond?
A premium bond is an investment from National Savings & Investments, who are backed by the treasury, which makes it a very secure type of investment. A premium bond is a bit like a cash account, but instead of receiving interest each month, you're entered into a prize draw to win one of a series of prizes, including (each month) one of two £1,000,000 jackpots.
Can I set up a premium bond for my child when they are born?
It is possible to open a premium bond account for your child once they're born, but you do need to be 16 or over to actually open an account. On the application form it's possible to fill in a part to say that the premium bond account belongs to a child.
How do I go about setting up a premium bond for my child?
To set up a premium bond for your child, who's aged under sixteen, you need to use the paper application form, rather than the telephone or web based application. These are available either directly from National Savings and Investments or you can pick up an premium bond application form at your local post office.
Can someone else set up a premium bond for my child on my behalf?
It is possible for somebody to set up a premium bond for your child on your behalf, but they do need to be the legal guardian of the child.
What's the best savings account for my child?
The best savings account for a child is typically one offered by your own bank or building society. Most banks and building societies offer special savings accounts for children, and these often pay a higher rate of interest than the traditional savings accounts for adults.
What research should I do when choosing a savings account for my child?
You should do plenty of research when choosing a savings account for your child to make sure your getting a competitive rate of interest. The best starting point is your own bank or billing society, and then you can use that savings account as a point of comparison when you research the rest of the market. There are plenty of price comparison websites available where you can do that sort of research. Alternatively tables of interests rates on savings are often published in the Sunday papers. Once you've found a competitive rate of interest it is worth looking for other features on the savings accounts such as notice periods.
How should I teach my child about saving and budgeting?
You should get your child involved with the concepts of saving and budgeting from an early age, because it teaches them about the value of money, and also teaches them to take some responsibility with their money. And the best way to teach them is really to get them involved. Teach them how to use their own pocket money to save and also budget for different items they might want to buy, but actually let them get involved a little bit if possible with your family finances.
How can I get my child involved in family finances?
The best way to get a child involved in the family finances is to include them when you're looking at statements and bills, and when you're paying for things in shops. Really teach them how money works and what the value of money is.
Why should I give my child pocket money?
You should give your child pocket money because it is a great way to teach them about the concepts of saving and budgeting. Pocket money also teaches them about the value of money and that they have to save up for things rather than be able to buy them whenever they want.
How much pocket money should I give my child?
The amounts of pocket money you give your child is a very personal decision to make, and you shouldn't be led by what other people say they give their children, or what published figures say is the average amount of pocket money. It's important to set a level that's affordable, but one you also feel is fair for the child. You may also want to use pocket money to reward children for good behaviour or helping around the house.
Is it better to give my child pocket money or just give them money when they need something?
It's far better to give your child pocket money than just give them money when they need something. Pocket money teaches them that money doesn't grow on trees and they should budget for things and save up rather than just be able to buy anything they want.
