CTF accounts revolutionise savings

One scheme is bucking the trend in savings by allowing parents to save money long-term for their children.

Introduced five years ago, the Child Trust Fund (CTF) will this year see more than five million children holding accounts, with every child born after September 1st 2002 eligible.

The Children's Mutual says that the CTF has "revolutionised" savings for children at a time when many people are reluctant to save money because of historically low interest rates.

Approximately half of parents at The Children's Mutual have set up a monthly direct debit to go into their child's CTF, which compares with the alarming statistic that, before the CTF was established, just one fifth of families were saving long-term for their children.

The Children's Mutual chief executive David White said that the five years since CTF introduction have "gone by in the blink of an eye".

"In that short amount of time, the results have been startling - the CTF has done what no other savings account has achieved before - getting the mass UK population engaged and saving," he explained.

Mr White went on to say that he is "delighted" that parents have started realising that the best way to save money for their sons' and daughters' futures is by beginning to save as early as possible.

A recent survey by The Children's Mutual revealed that almost three-quarters of parents chose to open a CTF account themselves rather than let the government do it for them, which suggests that new mums and dads have become more savings conscious.

The organisation predicts that, collectively, £2.74 billion will available to CTF account holders every year by the time they reach 18, with some £22 million being added each month by parents, families and friends.

This money will allow children to get on to the property ladder by the time they become adults, while it will also help with university costs once they leave school.

In addition to providing children with a head-start, the government hopes the introduction of the CTF will encourage them to start saving by the time they become adults by boosting their knowledge of personal finance.

The first CTF accounts will start to mature in 2020. When a child reaches 18, their CTF will cease, giving them the opportunity to either carry on saving in a traditional savings account or put the money towards an investment.

How much a child receives is dependent on when the account was opened, the rate of interest, how much was contributed and the level of provider charges.