Melanie Bien: A new breed of young savers

Trust funds tend to be associated with rich families ­ the result of legacies from wealthy relatives. But the Government's plan to issue new-born babies with a baby bond, a trust fund they will be able to access as they get older, looks set to change all that.

Trust funds tend to be associated with rich families ­ the result of legacies from wealthy relatives. But the Government's plan to issue new-born babies with a baby bond, a trust fund they will be able to access as they get older, looks set to change all that.

Under current proposals, babies born into low-income families will get up to £500 in a tax-free investment vehicle, with a further £100 on their fifth, 11th and 16th birthdays. The plans are still in their consultation phase so no decision has been made as to the age by which children can access this money ­ it could be 18 or possibly 21.

How the money is spent once children get their hands on it will be interesting. The Government is hoping that it will go towards further education, a deposit on a house or a car. How much more tempting it might be to take the trip of a lifetime: a couple of months off in Malaysia with your windfall. But maybe the pressure of parents who are struggling to send you to university might persuade you to do the decent thing and put the money towards tuition fees.

Aside from the fact that a general election is coming up which might well explain the timing of the announcement, the idea behind it is sound. The Government wants us to save and fend for ourselves financially ­ whether it be for health, education or retirement. Getting off to a good start, as babies, is a good idea.

I remember being encouraged to save as a child: collecting our NatWest piggy banks via our savings accounts, my brother and I didn't realise at the time that we were having sound financial principles instilled into us. It was all about living according to your means: if you wanted a new Arsenal scarf, you went without sweets; you saved up for it and the money came out of your account.

But then we were lucky: we didn't get pocket money but we did "earn" the odd 50p here and there for household chores. If you don't have money to save, you can't, which is why the Government's traditional method of encouraging us to save through tax breaks, pensions and individual savings accounts (ISAs) won't help those on the breadline.

The Government still can't quite help itself: alongside the baby bond will be a savings scheme whereby those on low incomes will be matched pound for pound up to a limit of £1,800.

But if you don't have the money in the first place, no amount of incentives are going to make you save.

However, lump sum cash gifts might just make saving and investing possible for those who have had little opportunity to do so in the past.

m.bien@independent.co.uk