Childrens Accounts Explained
Which type of child trust fund is best for my child?
Most parents opt for a stakeholder account, because these products have been specifically
designed for the CFT savings scheme and as mentioned above, they are the Government’s
favoured option. It is worth noting though, that not all stakeholder accounts are
the same and performance does vary – it is therefore worth doing a bit of research
before deciding which scheme to go for.
However, while the Government may recommend stakeholder products, this does not
necessarily mean that you are wrong to opt for a non-stakeholder or cash account.
If you are a cautious investor and are not happy to take the risk of investing money
for your child’s future in the stock markets, then you may prefer a cash account.
If you are a cautious investor and are not happy to take the risk of investing money
for your child’s future in the stock markets, then you may prefer a cash account
Non-stakeholder CTFs tend to be most popular with experienced investors who are
prepared to take higher-than average risk and a big advantage is that you have a
much wider choice of where your child’s money is invested.
However, unlike stakeholder CTFs, these schemes are not ‘life-styled’ so the underlying
investment is not automatically transferred into lower risk assets as the child
reaches the age of 18. Also, there is no cap on the annual management charge so
it could be higher than 1.5%. There may also be an initial charge to pay.
If you are a cautious investor and are not happy to take the risk of investing money
for your child’s future in the stock markets, then you may prefer a cash account.
Don’t worry too much about getting the choice right first time – if you open an
account and it doesn’t perform well compared with other schemes, or you decide you
would rather your son or daughter’s money be invested elsewhere, you can switch
provider at any time.
Continue to Page 5 to How do I register my child? >>
