Big rise in family savings for children

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The Independent Online

The number of families making regular savings for their children has increased by some 150 per cent since the introduction of the Child Trust Fund Scheme in 2005.

According to figures from the Children's Mutual, one of the UK's largest children's savings organisations, around 50 per cent of families are now making regular additional contributions to their children's savings plans, compared with around 18 per cent before the CTF scheme was launched in April 2005.

The amount being saved by parents has also increased. The average monthly contribution into children's savings plans is now £24 a month, compared with £15 a month before the introduction of the CTF scheme.

David White, the chief executive of the Children's Mutual, says that parents saving £24 a month into a plan for their children – on top of the money paid into the plan by the Government when the child is born and the additional top-up at age seven – could create a pot worth £9,800 by the time the child turns 18, assuming investment growth of 7 per cent a year.

"I think it will change many things for the country if we have lots of youngsters with this sort of money available to increase their choices and opportunities," said Mr White. "It is always interesting to consider what they might do with the money. I think you will find it is clear from our research that 18-21 year olds and their parents are both aware of the stiff financial challenges faced by 18-30 year olds these days."

Although there have been concerns that the children may simply squander their child trust fund savings once they are allowed to get their hands on them at the age of 18, research by the Children's Mutual – surveying today's teenagers and parents – suggests that most people will use the money to help fund further education, or buying their first home.

The Government plans to begin working more fin-ancial education on to the school curriculum over the coming years, making use of the fact that all children will have savings for the first time. Currently, most children are given £250 by the Government at birth, or £500 if they come from a low-income family. The Government has also committed to making an additional contribution once they reach seven years old.

Parents have 12 months to invest their child's money, after which it is automatically farmed out to a savings provider. Currently, around 75 per cent of parents actively invest their children's money.