When you become a parent, it is a life changing experience which does entail many factors to consider.  Not only do you need to meet immediate financial costs for equipment for your young one.  You must also consider the long term financial obligations involved in planning for your Childs future.  During the current financial difficulties many of us are experiencing at the moment it is of the utmost importance that we consider our children’s long term prospects and support them to the best of our ability.  Our children do not choose to be in this world and have no say in the environment or circumstances they are born into.  It is important to parents to ensure their children have some financial assistance in their first steps into adulthood.

There are many savings vehicles available for those wishing to save for their children’s futures; you can very easily feel lost in all the terminology involved.  Terms such as stock market scheme, collective interest schemes and National Savings Schemes.  Before making any final decisions regarding investment you should consult an Independent Financial Advisor.  A Financial Advisor will help you by ascertaining which factors are important to you and providing all the information you need to choose the most suitable route for you to take.

If your child was born on or after the 1^st September 2002, they are entitled to a £250 voucher from the government with which to open a Child Trust Fund account.  Families that receive full Child Tax Credit may be entitled to double this amount.  You are permitted to contribute up to £1,200 per year, tax-free into the account.  There are many different products available on the market for providing savings for children’s futures.  Broadly speaking they can be categorised into three main groups. 

Stakeholder Accounts

Stakeholder Child Trust Fund accounts follow certain rules and invest in shares in numerous companies.  Once your child reaches the age of 13, money in the account begins to be transferred to invest in low risk shares.  This is done to protect the value of the Stakeholder account as your child approaches the age of 18.  If you do not open a CTF account before your voucher expires, this is the account HM Revenue & Customs will automatically open on your child’s behalf.

Stock Market Investing

These types of Child Trust Fund accounts invest money from the account by buying shares in companies.  Generally over long periods of time the value of shares tends to rise although in the short term the value of shares may rise and fall.  Due to the nature of this account there can be no guarantees on how the account will perform or the value the account will achieve.

Savings Accounts

This method of saving offers the safety of not being invested in shares but because of this the rate of growth will be much slower.  This type of account is easy to understand and manage as well as being secure; this type of account will not lose money.  Child Trust Fund savings accounts do not do as well when compared to those that invest in shares especially when inflation is taken into account.  These savings accounts are long term usually until your child reaches the age of 18.

If you have any further questions find a local Independent Financial Advisor who specialises in savings and investment advice.