Child Trust Fund Scheme

[Robbie]

What do you think of Labour's new plans for child trust funds? This is where they give each new-born a bond to invest in a trust fund, adding extra amounts on various birthdays and allowing parents to contribute so that the average child ends up with £7000 at 18. They apparently will only be able to spend it on worthwhile things like education, housing etc.
I can see the argument that having an asset makes people more likely to be responsible citizens, but Lord knows how much it's going to cost to administer. Surely this money would be better spent on the state education system, which is almost unusable in parts of the country? Is this just a pre-election gimmick? Would it make you more likely to vote Labour?

[Kate71]

Robbie I fail to see why they will give children money only to take it for uni fees. Have I missed something? Why are they giving parents money to invest when they could give a lump sum at the end, after all they are limiting the way you can spend it. I agree with Charles Kennedy it is very "gimmicky"
The Adult savers scheme sound more interesting and sensible. The government would match savings of poorer adults pound for pound up to £1,800. As there are so many people in the UK with no savings at all - most of them on low incomes.

[Marina]

I agree with Kate71 about the Adult Savers Bond. I heard very little about that in the press and I think that's a super idea.

[Sml]

I suppose that key fact about the money for children is that they can choose whether to spend it on uni fees if they are that way inclined, or on housing or something else to give them a good start in life if not. Can see the point that it should all be invested in primary and secondary education instead though.

[Tigermoth]

Any money, anywhere along the line sounds good to me! I suppose home educators could say, with some justification, that this money could go directly to HE families to help with their children's home education. It might make this, and other un-mainstream forms of education easier to undertake - thinking of those budding 'Billy Elliots' out there.

[Lil]

On the other hand your average 18 year old might just spend it on drugs, clothes and music!

[Driftwood]

It is definitely an election gimmick. Most 18yr olds (I remember that far back) will spend it on a car/clothes etc. So it will not really improve their lot in the long term.

To limit where they spend it (say education and housing) means that for the really poor (who cannot afford either (thanks to the government)) the money will not be used.

I know I sound negative, but surely there are better ways (i.e. reduce tax paid by low income earners)

[Sml]

According to Robbie's posting, they will only be able to spend it on useful stuff like uni fees etc. Not quite sure how that will work though.

[Tigermoth]

If the money is in the form of a grant, I suppose various criteria will have to be met by each applicant. Agree that it shouldn't end up on clothes and drugs. And then of course, if cash is available to children early on, you'll lose years of interest on it. Yet for some talented children, an early cash boost could help change their lives. It's a tricky one. Glad I'm not in government.

[Lil]

Sml, According to channel 4 news yesterday the govnt HAVE NOT decided if they have the right to give us money and then tell us what we should do with it. SO sex, drugs & Rockn Roll is still on the agenda!

[Chairmum]

From what I've read so far, it will only be available when a child gets to 18, so wouldn't be of any use to home-edders. It smells of pre election tax gimmick to me. It would be better to reduce the general burden of tax so people can do what they want with their own money. Its crazy that people earning the minimum wage still fall into the income tax bracket tax!!

[Bugsy]

So who is going to check what the money is spent on? It sounds like an idea that could potentially be very expensive to administrate. Who is going to ensure that children end up receiving a similar amount? What is to say that some kids are lucky and have investments which do really well because of economic boom during their childhood and others whose don't do so well because of an economic decline?
I don't know enough about these proposals but they sound like an election gimmick to me. I also can't work out how it is going to eradicate child poverty, if kids don't receive until they are 18.

[Jodee]

Whether Labour do or don't go ahead with the child trust fund plan, I'd like to put some savings aside for my one year old for when he turns 18. I can't decide whether to go for a Baby Bond thru an equitable society or National Savings Children's Bonds, or just stick money into a building society account.

Any financial whizz kids out there who can help please?

[Jbr]

That money should go on education and creating proper jobs. The best thing you can do for any child is give them something to do when they grow up.

[Chelle]

When I was born (and my brother and sister in turn) my parents put all the money they were given as gifts into a normal savings account. From then on, any money we were given as gifts (while we were too young to realise we weren't getting the money in hand!) went into this and they added $5.00 per week per child until we turned 18. At that time we had the choice of taking the money then or re-investing it and they would keep adding to it until we turned 21. I re-invested mine in fixed term depsits and then when it was handed over to me at 21, bought shares. By the time I was 24 we (my fiancee, now husband, and I) had enough money for a deposit a farm! From the other side, however, my brother took his money at 18, bought a car and wrote it off after only 6 days!!!

When our son was born (23 months ago) we made the decision to do something similar and bought him a parcel of shares in a solid bluechip company. We thought we would do this for any future children as well, but we might pool the shares so each child gets a similar amount even if one of the shares doesn't do as well as the others. We reinvest all the dividends back into shares.

[Jodee]

chelle - many thanks for your message, that's another option that I hadn't thought of.

If anyone has any other suggestions, very glad to hear them.

[Janh]

jodee, with the stakeholder pensions you can open one for a child now and i'm sure i heard that if you put all the child benefit in they'd have a 6 figure fund by the time they're 18!

check it out though (obviously!)

talking about electioneering - which some people were before! - i just wish they would stop competing about income tax and put it back up a bit - especially higher rate tax. fat chance, unfortunately.