GUIDE TO INVESTING IN A CHILD TRUST FUND

THE THREE OPTIONS

Option One – Savings Accounts

This is the low *risk* option, but it is also the option that, going by past *returns*, is likely to earn the lowest amount of money for your child by the time they reach 18.  It works in much the same way as a normal cash *deposit account*.

Option Two – Accounts that invest in shares, bonds or a mix of the two

This option does involve some stock market risk to your child’s money, but because it has to be invested for at least 18 years, it is likely to provide more money for your child than if you put the money in a savings account.

It is also the most flexible option, as it gives you a number of investment choices. For example, you may choose to invest the CTF directly in the *shares* or *bonds* of just one company, or you could invest in a number of different companies. In addition, if you’re not sure about which companies to invest in, or you’d like to hold the shares or bonds of a large number of companies, you can invest in *Investment Funds* which use professional *managers* to choose a range of shares and/or bonds on your behalf. 

We have provided a simple explanation of shares and bonds, along with their risks and rewards here.

Option Three – Stakeholder Accounts

This option involves a concept called “Lifestyling”.  It provides a one-stop strategy that makes the investment decisions on your behalf. This option comprises a mix of shares and bonds chosen on behalf of your child by the company managing your money and is altered depending on how close your child is to reaching 18. It is riskier than a savings account, but that risk is managed with a view to making the value of your child’s CTF grow more. A more detailed explanation of Lifestyling follows later in this fact sheet.

The *annual charge* on this option is limited to a maximum of 1.5 per cent – which means there will be a charge of no more than £1.50 a year for every £100 in the account. The charges on the other two options are not limited in this way.