GUIDE TO INVESTING IN A CHILD TRUST FUND

MAKING THE MOST OF THE CTF THROUGH INVESTMENT FUNDS

The Child Trust Fund (CTF) is a tax-free way of saving for your children. Every eligible child will at birth receive a voucher worth at least £250 to invest in a CTF. The government will make a further contribution of at least £250 when the child turns seven. In addition, up to £1,200 a year extra can be added to each account by family members and friends and the money cannot be withdrawn until the child turns18.

The CTF is an excellent way of saving money for your child’s future expenses (such as university fees or the deposit on a home). To ensure that your child gains maximum benefit from his or her CTF in the future, it is crucial that you understand the three options that are available. Two of these options involve some *risk* to the money in your child’s CTF. However, the same two options are also likely to provide more money for your child when they reach 18.

This factsheet explains those options, and will provide you with information to help you decide whether the higher rewards on offer are worth the extra risks involved. It talks about the differences between *cash*, *shares* and *bonds* and helps you think about what may be best for your child’s CTF. It also looks at *Investment Funds* as a simple way of getting a good *return* from your money over the longer term.

If you require technical details of how the CTF works, such as tax benefits, eligibility and withdrawing money, you can refer to our further information section. We also recommend you visit the Government’s official website at www.childtrustfund.gov.uk
 

Please note that IMA’s factsheet is for information purposes only. It does not constitute advice. It simply aims to help you better understand the risks and rewards of Investment Funds and why they can help reduce the risk of loss through “*diversification*” (the spreading of your money across a range of investments). Money deposited in a bank or building society is relatively secure, whereas an investment involves stock market risk. This means that the value of your investment can go down as well as up. If you require any advice on investments, you should contact a *financial adviser*.