Don't worry about falling returns on child trust funds

With the markets tumbling, parents may be concerned about the returns on their child trust funds. Ruth Jackson explains why you shouldn’t worry about short-term losses, outlines the ins and outs of child trust funds, and suggests two alternative ways of saving for your child’s future.

Since child trust funds (CTFs) were launched in 2005, they have been lauded as an excellent way to save for your child's future. The government gives you a £250 voucher which you can invest in either stocks or a cash account. The government adds another £250 on your child's seventh birthday.

Parents, grandparents and others can then add up to £1,200 a year between them to the trust, and on the child's 18th birthday they get access to all the money. What's more, income and capital gains are all tax-free. HM Revenue & Customs (HMRC) reckons that 4.3 million child trust fund vouchers have been issued so far, of which three million has been invested by parents (if you don't invest after a year, the Government does it for you).

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Ruth Jackson-Kirby

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping, among many other titles both online and offline.