Why we should give the banks to our babies.

We all know that the average Briton is woefully financially illiterate. And we all also know that Child Trust Funds (CTFs) are pretty useless: most people leave the money in cash or let the government invest it for them. The result? Millions  of pounds worth of cash sits around doing nothing for a couple of decades and the average 18 year old might get a bit more money to spend in TopShop than she would have otherwise.

So here’s an idea to solve both problems, courtesy of an ex hedge fund manager friend: why not stop giving newborns cash in their CTF and hand them a few thousand RBS shares instead? Say they can’t sell them until they are 18 and insist that all dividends are reinvested into shares in RBS too.

Instantly everyone, from new parents to small children to teenagers will be interested in finance and in the banking sector in particular. They’ll learn how shares work. They’ll see real saving in action. And they’ll agitate for a financial system that guarantees that individual banks will survive over the long term: if they’re going to be holding their shares for going on two decades they won’t be interested in quarterly reports, they’ll be – as all shareholders should be – interested in steady dividend payments and in long term sustainable growth.

They might also – aware that every penny paid to staff is a penny not paid to their accounts – keep a close eye on pay and bonuses. This would all be good. Finally, as a neat side effect, the policy might, in a small way, help the government run down its massive holding of bank stock without flooding the market too much.