Tuesday 8th May 2007
Parents should consider more than just child trust funds when thinking about child investments, an expert suggests.
Jason Hollands, head of group communications for F&C Investments, warns that child trust funds may see savings handed over to children on their 18th birthday regardless of whether they possess the maturity to spend the money wisely.
However, the spokesperson adds that by taking advantage of alternative forms of child investments, parents can protect the money they put towards their childrens future without losing out on high interest rates and tax-free savings.
A possible alternative proposed by the expert is the use of an individual savings account (Isa) as a means of holding money for a child without paying tax, but without relinquishing control over the funds in the future.
He advises: "If youre a parent and youre really concerned that you dont want your child to have access to a large sum of cash at 18 ... an alternative might be to pay money into an Isa in your own name."
While pledging his firms support for child trust funds, Mr Hollands suggests that products such as savings accounts which allow parents to be listed as trustees may provide an existing alternative to the recently-introduced scheme.
Financial services provider Nationwide this week urged parents who do opt for child trust funds to deposit their initial government voucher as early as possible so that the balance may begin to accrue interest.
Parents are provided with a £250 voucher following the birth of a child, which may be deposited into a new fund at any point during the first year of their childs birth.
However, Nationwide cautions that parents waiting until the 12-month period is over before taking advantage of the vouchers could be missing out on about £14 in the first year.
Carrying this figure forward over the full 18-year period during which the funds reach maturity, the building society predicts total losses of £35.30 per child in compound interest.
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