This month, the government is for the first time topping-up the Child Trust Fund accounts of every seven-year-old in the country by £250, with a further £250 payment being made to children of low-income families and in care.
Child Trust Funds are initially set up with a total of £250 when a baby is born and are topped up again by the government at the age of seven. The funds were launched in 2005 and backdated to all children born from September 2002 onwards, so this month the oldest trust fund holders will reach the age of seven and receive the additional payment. In Streatham, 7,360 children hold Child Trust Funds and stand to benefit.
Child Trust Funds are designed to help families save for their children’s future, ensuring that every eighteen-year-old leaves education with a financial asset. Families are able to add to the fund, and given the growth the investment makes over eighteen years adding as little as £10 per month means the fund will be worth as much as £4,500 on maturity. If the maximum amount is added each month, it could eventually be worth as much as £37,000.
The funds also help young people get into the habit of saving and experience in running personal finances, being able to take control of investing the account at the age of sixteen but the money being locked away until they are eighteen.
Both the Liberal Democrats and the Conservatives oppose Child Trust Funds. Vince Cable, Liberal Democrat treasury spokesman described them as “unnecessary” and has identified them as a possible cut.
Commenting on the trust fund boost, Chuka Umunna said:
“Child Trust Funds are a fantastic way of saving for our children’s future, giving families a nest egg for when their children reach adulthood.
“The funds allow children to invest in their aspirations, with the most help going to those from the poorest backgrounds. Without a Labour government we wouldn’t have this help for families. Child Trust Funds have been consistently opposed by both the Conservatives and the Liberal Democrats.”