The New Junior ISA vs The Old Child Trust Fund

There is no doubt that the new Junior ISA has been brought in to fill the gap left by the old Child Trust Fund (CTF). They both perform the same function - providing an incentive for parents to save on behalf of their children; to build them a nest egg for their future. But how do the two investment vehicles compare and why has the CTF been replaced by its new-fangled successor? The first part of this article looks at the overlaps between the plans; part two addresses the differences in more detail.

Purpose
The new Junior ISA and the now closed CTF both share a common aim: to encourage parents and guardians to save money for their children so that when they reach adulthood the money awaiting them can be used to kick start the rest of their lives. By providing a tax exempt vehicle where the invested monies belong to the child, the idea is that the funds will be securely ring-fenced whilst given the best chance to grow successively as the child grows.

Term
In both cases, as suggested above, the money put into these plans is locked away until the child turns 18. No-one, neither the parent nor child can access it until that point with the only exceptions being in the event of extreme circumstances such as the death of the child or a terminal illness.

Tax
The Junior ISA and the Child Trust Fund share the same tax breaks in that they are not taxed on any income generated by assets within the plans, whether it be interest payments on cash deposits and bonds, or dividends on stocks and shares. If those assets grow significantly they will also avoid being subject to capital gains tax (CGT) as they would if they were held outside of an equivalent tax exempt savings vehicle.

Junior ISAs and CTFs aside, children are subject to the same income tax thresholds as adults where their income would only become taxed if it exceeded £7,475 in a given tax year. However, it is worth bearing in mind that other child savings accounts, for example, can still be subject to tax on income which exceeds £100 per year for any monies donated by an individual parent or stepparent (to prevent parents using these accounts for personal gain). Neither the CTF nor the Junior ISA have these £100 income caps.

In addition, an important consideration for parents or families on lower incomes is that when the times comes at which the child (then adult) can, if they wish, access the funds from these plans, the new influx of money won’t affect the calculation of any benefits that they may be receiving.

Subscriptions/Contributions
Although the CTF previously had a contribution limit of £1,200 per year it has now been raised to match the subscription limit of Junior ISAs. The increase dating from the point at which the ISAs were launched on 1 November 2011 means that each type of plan will now permit up to £3,600 to be contributed (subscribed) each tax year.

Management
The CTF and the Junior ISA must be run/managed by a single registered contact who will usually need to be either a parent or guardian. This person will then be responsible for making all decisions about how and where the funds in the plans are invested. In the case of the CTF, a voucher which entitles the child to an initial government donation (usually £250) is sent to a parent at the outset and this person is then responsible for setting up the account using the voucher. Similarly the registered contact for a Junior ISA will be the parent/guardian who opens the child’s first ISA. The registered contact in both cases will be responsible for the account until the child turns 16 when for the CTF they will and for the Junior ISA they can, if they wish, take over the running themselves for the remaining two years. The plans and the money therein, however, are always the property of the child even before they turn 16 and cannot be accessed by the registered contact at any stage.

As you can see there are a number of significant similarities behind how the CTF and the new Junior ISA are run and why they exist as savings options for parents and children in the first place. So all this does beg the question as to how the new Junior ISA is different to its predecessor and why the original CTF was scrapped in favour of the new investment vehicle.

Having discussed the features that the old Child Trust Fund (CTF) and the new Junior ISA had in common in the first part of this article the following highlights some of the ways in which they differ an why the Junior ISA has been brought in place of the CTF.

Availability
The most obvious discrepancy between the two plans is that the CTF is now closed to newborns, in fact any child born after 2 January 2011. As discussed in the first part of this article, children born between 1 September 2002 and 2 January 2011 will have been issued with a voucher which will have either been used by parents to open a CTF account or will have expired, in which case the HMRC will have automatically opened an account on the child’s behalf.

The Junior ISA, however, can be opened for any child born either side of the CTF’s active dates above. Thus, children born before the CTF was launched in 2002 can still have a Junior ISA opened for them whilst newborns since January 2011 are also eligible.

State Contributions
The most popular feature of the old CTFs is that, for most children, the government would have issued a voucher worth £250 to get the plan going. This initial kick start varied if the child was in a low income family, in which case they could receive up to £500, or if the child received its first child benefit payment after 3 August 2010 - when they were then only entitled to a donation of £50 as the government began to scale back its contribution. What’s more, the CTF also promised a second state contribution of £250 when the child turned seven, if that event occurred before 1 August 2010.

Unfortunately, the new Junior ISA comes with no such welcome, or the extra boost at the age of seven, which explains why parents have been more lukewarm about their arrival in the place of the more generous CTFs.

Investment Choices
The CTF, broadly speaking, came in three different guises which offered certain investment choices based upon the risk that the parent (registered contact) wanted to take on in search of higher returns on the investment. Essentially, as with most investment, the higher the potential returns, the high the risk encountered.

The default account, that treads the middle ground, is a Stakeholder Account, which was what children ended up with if the voucher expired before the parent managed to open an account for them. These accounts invest the funds into shares and bonds but are required by government rules to spread the risk across multiple companies rather than put proverbial eggs into single baskets. What’s more the providers of such accounts are required to switch the funds to low risk investments once the child turns 13 to safeguard the plan as the child approaches 18.

The most secure CTF option is a Savings Account which simply invests the funds as cash and therefore protects the capital of the investment whilst only providing limited returns in the form of the interest accrued on that capital. The riskiest option with the highest potential returns, is the Share Account which, akin to the Stakeholder Accounts, invest the money into stocks and shares but unlike such accounts, don’t have the government required safeguards. Therefore there is a higher level of risk involved although the length of the terms involved (18 years) should increase the chances of any losses being counterbalanced by gains in the long run.

Junior ISAs on the other hand, can consist of a cash element and/or a stocks and shares element, just as their adult counterparts do. As little or as much of the subscriptions can be put into each as the parent/child wishes. The variety between individual plans will result from the distinct offerings of each ISA provider, such as varying discounts in investment charges and access to different ranges of investments. In principle, the parent/child can manage what their plan invests into although some providers may link their plans to specific funds, like investment trusts, for which the fund manager will decide how the underlying investments are to be managed.

Options at Maturity
The Junior ISA further differs from the CTF in terms of what happens to it when it reaches maturity and the options that are available to parent and child when they turn 16. At age 18, both the Junior ISA and the CTF become available to the ‘child’ to do with as they see fit but if no other action is taken the JISA will automatically turn into an adult ISA whereas the CTF won’t.

At age 16 the Junior ISA gives children the option of taking over the management of the plan themselves however, the CTF requires that the child take over the management. Neither plan of course allows the child (or parent) to access the funds until the child is 18.

Why The Switch?
As implied previously, the main reason for the scrapping of new CTFs was their cost to the government. At a time when the national budget had been squeezed from every angle the coalition government took the decision to save themselves an anticipated £320m-plus a year that CTFs would have continued to cost. In terms of a state contribution to child savings, the government do still however forgo the taxes that would otherwise be raised on the income generated by the investments in the new Junior ISAs.

In summary, both the CTF and the Junior ISA each have their own advantages and disadvantages whilst broadly sharing the same purpose and goals. Ultimately, parents are unable to choose between them and are restricted to one or the other depending on when their child was born, but the new Junior ISA, for what it lacks in state contributions, does offer parents and children increased flexibility and savings potential.

The New Junior ISA vs The Old Child Trust Fund - The Differences

Having discussed the features that the old Child Trust Fund (CTF) and the new Junior ISA had in common in the first part of this article (The New Junior ISA vs The Old Child Trust Fund - Overlap) the following highlights some of the ways in which they differ an why the Junior ISA has been brought in place of the CTF.

Availability
The most obvious discrepancy between the two plans is that the CTF is now closed to newborns, in fact any child born after 2 Jan 2011. As discussed in the first part of this article, children born between 1 September 2002 and 2 January 2011 will have been issued with a voucher which will have either been used by parents to open a CTF account or will have expired, in which case the HMRC will have automatically opened an account on the child’s behalf.

The Junior ISA, however, can be opened for any child born either side of the CTF’s active dates above. Thus, children born before the CTF was launched in 2002 can still have a Junior ISA opened for them whilst newborns since January 2011 are also eligible.

State Contributions
The most popular feature of the old CTFs is that, for most children, the government would have issued a voucher worth £250 to get the plan going. This initial kick start varied if the child was in a low income family, in which case they could receive up to £500, or if the child received its first child benefit payment after 3 August 2010 - when they were then only entitled to a donation of £50 as the government began to scale back its contribution. What’s more, the CTF also promised a second state contribution of £250 when the child turned seven, if that event occurred before 1 August 2010.

Unfortunately, the new Junior ISA comes with no such welcome, or the extra boost at the age of seven, which explains why parents have been more lukewarm about their arrival in the place of the more generous CTFs.

Investment Choices
The CTF, broadly speaking, came in three different guises which offered certain investment choices based upon the risk that the parent (registered contact) wanted to take on in search of higher returns on the investment. Essentially, as with most investment, the higher the potential returns, the high the risk encountered.

The default account, that treads the middle ground, is a Stakeholder Account, which was what children ended up with if the voucher expired before the parent managed to open an account for them. These accounts invest the funds into shares and bonds but are required by government rules to spread the risk across multiple companies rather than put proverbial eggs into single baskets. What’s more the providers of such accounts are required to switch the funds to low risk investments once the child turns 13 to safeguard the plan as the child approaches 18.

The most secure CTF option is a Savings Account which simply invests the funds as cash and therefore protects the capital of the investment whilst only providing limited returns in the form of the interest accrued on that capital. The riskiest option with the highest potential returns, is the Share Account which, akin to the Stakeholder Accounts, invest the money into stocks and shares but unlike such accounts, don’t have the government required safeguards. Therefore there is a higher level of risk involved although the length of the terms involved (18 years) should increase the chances of any losses being counterbalanced by gains in the long run.

Junior ISAs on the other hand, can consist of a cash element and/or a stocks and shares element, just as their adult counterparts do. As little or as much of the subscriptions can be put into each as the parent/child wishes. The variety between individual plans will result from the distinct offerings of each ISA provider, such as varying discounts in investment charges and access to different ranges of investments. In principle, the parent/child can manage what their plan invests into although some providers may link their plans to specific funds, like investment trusts, for which the fund manager will decide how the underlying investments are to be managed.

Options at Maturity
The Junior ISA further differs from the CTF in terms of what happens to it when it reaches maturity and the options that are available to parent and child when they turn 16. At age 18, both the Junior ISA and the CTF become available to the ‘child’ to do with as they see fit but if no other action is taken the JISA will automatically turn into an adult ISA whereas the CTF won’t.

At age 16 the Junior ISA gives children the option of taking over the management of the plan themselves however, the CTF requires that the child take over the management. Neither plan of course allows the child (or parent) to access the funds until the child is 18.

Why The Switch?
As implied previously, the main reason for the scrapping of new CTFs was their cost to the government. At a time when the national budget had been squeezed from every angle the coalition government took the decision to save themselves an anticipated £320m-plus a year that CTFs would have continued to cost. In terms of a state contribution to child savings, the government do still however forgo the taxes that would otherwise be raised on the income generated by the investments in the new Junior ISAs.

In summary, both the CTF and the Junior ISA each have their own advantages and disadvantages whilst broadly sharing the same purpose and goals. Ultimately, parents are unable to choose between them and are restricted to one or the other depending on when their child was born, but the new Junior ISA, for what it lacks in state contributions, does offer parents and children increased flexibility and savings potential.

The New Junior ISA vs The Old Child Trust Fund - Overlap

There is no doubt that the new Junior ISA has been brought in to fill the gap left by the old Child Trust Fund (CTF). They both perform the same function - providing an incentive for parents to save on behalf of their children; to build them a nest egg for their future. But how do the two investment vehicles compare and why has the CTF been replaced by its new-fangled successor? The first part of this article looks at the overlaps between the plans; part two addresses the differences in more detail.

Purpose
The new Junior ISA and the now closed CTF both share a common aim: to encourage parents and guardians to save money for their children so that when they reach adulthood the money awaiting them can be used to kick start the rest of their lives. By providing a tax exempt vehicle where the invested monies belong to the child, the idea is that the funds will be securely ring-fenced whilst given the best chance to grow successively as the child grows.

Term
In both cases, as suggested above, the money put into these plans is locked away until the child turns 18. No-one, neither the parent nor child can access it until that point with the only exceptions being in the event of extreme circumstances such as the death of the child or a terminal illness.

Tax
The Junior ISA and the Child Trust Fund share the same tax breaks in that they are not taxed on any income generated by assets within the plans, whether it be interest payments on cash deposits and bonds, or dividends on stocks and shares. If those assets grow significantly they will also avoid being subject to capital gains tax (CGT) as they would if they were held outside of an equivalent tax exempt savings vehicle.

Junior ISAs and CTFs aside, children are subject to the same income tax thresholds as adults where their income would only become taxed if it exceeded £7,475 in a given tax year. However, it is worth bearing in mind that other child savings accounts, for example, can still be subject to tax on income which exceeds £100 per year for any monies donated by an individual parent or stepparent (to prevent parents using these accounts for personal gain). Neither the CTF nor the Junior ISA have these £100 income caps.

In addition, an important consideration for parents or families on lower incomes is that when the times comes at which the child (then adult) can, if they wish, access the funds from these plans, the new influx of money won’t affect the calculation of any benefits that they may be receiving.

Subscriptions/Contributions
Although the CTF previously had a contribution limit of £1,200 per year it has now been raised to match the subscription limit of Junior ISAs. The increase dating from the point at which the ISAs were launched on 1 November 2011 means that each type of plan will now permit up to £3,600 to be contributed (subscribed) each tax year.


Management
The CTF and the Junior ISA must be run/managed by a single registered contact who will usually need to be either a parent or guardian. This person will then be responsible for making all decisions about how and where the funds in the plans are invested. In the case of the CTF, a voucher which entitles the child to an initial government donation (usually £250) is sent to a parent at the outset and this person is then responsible for setting up the account using the voucher. Similarly the registered contact for a Junior ISA will be the parent/guardian who opens the child’s first ISA. The registered contact in both cases will be responsible for the account until the child turns 16 when for the CTF they will and for the Junior ISA they can, if they wish, take over the running themselves for the remaining two years. The plans and the money therein, however, are always the property of the child even before they turn 16 and cannot be accessed by the registered contact at any stage.

As you can see there are a number of significant similarities behind how the CTF and the new Junior ISA are run and why they exist as savings options for parents and children in the first place. So all this does beg the question as to how the new Junior ISA is different to its predecessor and why the original CTF was scrapped in favour of the new investment vehicle. For more information on this see part two of this article: The New Junior ISA vs The Old Child Trust Fund - The Differences.

Why Save for Your Child’s Future?

The demise of the child trust fund set up by Labour in 2005 and the prospect of the Conservative-Liberal Democrat coalition’s new Junior ISA in the autumn of 2011 means that for many they will be re-assessing whether and how they will be saving for their child's future. As the cost of living seems set to continue its upward path, it is therefore worth taking a look at the benefits that still exist for putting money aside for children.

There are significant tax breaks to be gained when saving on behalf of your children, although as with all such schemes there are some limits and restrictions to be aware of.

Savings accounts for children are exempt from any tax on the interest that accumulates on deposits as long as the child in question does not have a total income exceeding £6,475 for the current tax year (as with adults). However, if the money which is donated by an individual parent or step parent earns more than £100 interest in a tax year then the interest will be taxed as normal. This limit applies per parent though, so in a family with both parents present, the combined possible limit is £200 and there is even the potential for the limit to be as high as £400 if two step parents are involved. What’s more, the limit does not apply to grandparents and other adults that wish to contribute to a child’s savings plan. Therefore, these restrictions should not prevent parents and guardians from accumulating a healthy nest egg for their children which also benefits from the tax exemptions.

In addition, it is worth bearing in mind that any money placed into a child’s savings account will avoid being taxed inheritance tax providing the donor does not die within seven years of making the donation.

Whilst the Child Trust Fund (CTF) is being phased out by the coalition government, it is still a valid savings solution for many parents and their children. All children born between September 1st 2002 and January 2nd 2011 were eligible to start a child trust fund if they were paid any child benefit before January 3rd 2011. For those who have already opened an account, payments can still be made into it until the child turns 18. The trust benefits from a starting contribution from the government of at least £250 (except children who first received child benefits after August 2nd 2010 who will receive £50 only) with the possibility of further contributions for children in low income families. All income and gains from the CTF will be tax free although the contributions made by parents (or any other donors) must not exceed £1,200 in the tax year. The funds are held in trust for the child and although they can take over the management of the fund when they turn 16, they cannot withdraw funds until they turn 18 years of age. At which point they will also be able to transfer the funds to an ISA to protect the tax exempt status.

The coalitions government’s replacement to the CTF is the Junior ISA which is due to launch in the Autumn. The Junior ISA will not receive the government contributions that the CTFs benefited from however it will allow parents to save on behalf of their children and take advantage of the tax exemptions and investment choices that adults can currently benefit from with conventional Cash ISAs and Stocks and Shares ISAs.

There are a few other savings solutions for children which should be mentioned including the National Savings and Investments’ (NS&I) Child Bonus Bonds and Index-Linked Savings Certificates. These plans also benefit from tax exemptions but differ in the terms for which they run and how the income is generated.

Having outlined the available options for child savings and their advantages, time should also be spent considering why it is beneficial to save for your child’s future.

The recent fracas that has surrounded the coalition government's revamp of the tuition fee structure has brought the issue sharply into focus for many parents who must now be wondering how they will give their children the best possible foundation to make the most out of their higher education and deal with the financial consequences when they come out of the other side. One thing that seems certain is that tuition fees are here to stay in some shape or form as all three major political parties in England at least have backed a incarnation of the fees.

For many of course, University may not be may not be the primary consideration. It could also be argued that, even if it is, should the policies surrounding tuition fees remain as they are today, the nest egg you save for your child would in fact be best used to lay the foundation for their post university lives. Therefore attention turns to equipping your children for their professional adult lives.

The current climate means that it is harder than ever for first time buyers to get onto the property market. The days of easily obtained 100% mortgages have gone and financial institutions (and the public) may be wary of them being re-introduced due to the troubles of the credit crunch and subsequent recession. The focus has really come back onto having a substantial deposit. Whilst prices have come back down to some extent they have not fallen drastically and will no doubt creep back up the stronger the economy gets. Arguably the difficulty for first time buyers to get onto the market only seems likely to increase. Meanwhile, with oil prices rising, and consequently the cost travel, food etc, there are plenty of reasons to give your children the best head start possible whn the time comes.

Having painted a slightly gloomy picture of the prospects for our future generations you may wonder whether you can accumulate an amount which will really make a difference, especially at a time when budgets are already being squeezed by the cost of living. It is worth emphasising therefore that a little amount can go a long way. The earlier you start saving for children the greater the potential for growth that those savings have. What’s more, any amount will start your child’s adult life on a positive footing rather than encouraging them to begin in debt.

Encouraging Your Children To Save

Parents receive plenty of advice recommending that they consider saving money on behalf of their children, with successive governments also offering incentives in the form of the old tax efficient Child Trust Funds (CTFs) and the new Junior ISAs. The launch of the latter at the start of November has brought the subject back to forefront of many parents’ minds and it is therefore an opportune time to look at the reasons why it is not only a good idea to save on behalf of your children but to get them involved in the process as well.

Creating a Nest Egg
The primary reason for opening a savings vehicle for your child is usually to create a nest egg for their future; to put money aside which will help them on their way as they embark on adult life. The general economic troubles of the last few years together with the more acute issues, such as the raising of the tuition fee limit and the recent publication of youth unemployment figures topping 1 million, serve as timely reminders that you never quite know what the future may hold for you children when they reach adulthood. Therefore, any nest egg a child can access when they turn 18 may prove invaluable whether it helps cover their cost of living at university, their self sufficiency when employment is hard to come by or even if it helps them to get onto the property ladder.

To that end, savings vehicles such as the CTF or the Junior ISA are designed so that any money put into them will be protected until the child turns 18 in order for the funds to be available when they are most needed.

Educational Benefits
Beyond the more obvious financial benefits of opening a savings vehicles for you child it can also provide an excellent opportunity to introduce your offspring to the world of money so that they can be well prepared when the day comes for them to first take control of their own finances.

By getting children involved in the management and monitoring of their own savings you can increase their familiarity with concepts such as banks and interest and introduce them to the ideas that money you/we put into banks will grow and is (for the most part) secure. You can encourage them to understand that, for savings at least, the mechanics can boil down to the idea that we lend our money to the banks who will then pay us in return and that the amount they pay us is described in the interest rate. Once they are familiar with the more basic concepts they can be encouraged to take part in choosing their own accounts based upon criteria such as interest rates, and then monitoring their progress as they go.

Tax Benefits
Savings accounts for children are often referred to as being tax free which creates the false impression that children do not need to pay any tax at all on their money. In truth there are no differences between the tax children should pay on any money they put aside in savings accounts in comparison to their adult counterparts. In terms of interest, they are subject to the same income tax bands as adults, under which they are not required to pay tax on any income up to £7,475. For most (unemployed!) children this threshold is not likely to come into play but for children who may have extra earnings, parents should be aware.

There are further tax breaks though when adults wish to donate to a child’s savings plan. For any sum put aside by a parent or step parent the interest accrued will be tax free up to the limit of £100 per year, so where a child may have two parents and two step parents for example, this limit could even reach £400. What’s more, the limits do not apply to grandparents or any other generous adults so they can donate any amount of money to your child which would then benefit form tax free interest.

Through vehicles such as the Junior ISA (for children born after 3 January 2011 or before 1 September 2002) and the CTF (for children born between those dates) there are additional tax breaks on offer which mirror those of adult ISAs, such as an exemption from income, dividend and capital gains tax, but in turn the funds are locked up until the child reaches 18 as mentioned above.

Savings for Parents
It may seem slightly cheeky but, within limits child savings can be used as a means of saving a little bit more for the parents whilst taking advantage of the tax breaks. Obviously the above restrictions are designed to partly negate this and stop parents abusing their child’s savings options to circumnavigate tax but there is scope for benefiting up to the aforementioned £100 interest limits per parent. It is always worth remembering though that the money you put into a child savings vehicle does legally belong to the child not the parent (even though the child may not be able to do anything with it without your parental authority).

There are plenty of reasons why saving for children is a beneficial exercise and maybe the hardest decision you’ll have is working out which child savings vehicle is most appropriate for you situation, so it is always a good idea to seek out independent financial advice before committing to anything.

Why Save for Your Child’s Future?

The demise of the child trust fund set up by Labour in 2005 and the prospect of the Conservative-Liberal Democrat coalition’s new Junior ISA in the autumn of 2011 means that for many they will be re-assessing whether and how they will be saving for their child's future. As the cost of living seems set to continue its upward path, it is therefore worth taking a look at the benefits that still exist for putting money aside for children.

There are significant tax breaks to be gained when saving on behalf of your children, although as with all such schemes there are some limits and restrictions to be aware of.

Savings accounts for children are exempt from any tax on the interest that accumulates on deposits as long as the child in question does not have a total income exceeding £6,475 for the current tax year (as with adults). However, if the money which is donated by an individual parent or step parent earns more than £100 interest in a tax year then the interest will be taxed as normal. This limit applies per parent though, so in a family with both parents present, the combined possible limit is £200 and there is even the potential for the limit to be as high as £400 if two step parents are involved. What’s more, the limit does not apply to grandparents and other adults that wish to contribute to a child’s savings plan. Therefore, these restrictions should not prevent parents and guardians from accumulating a healthy nest egg for their children which also benefits from the tax exemptions.

In addition, it is worth bearing in mind that any money placed into a child’s savings account will avoid being taxed inheritance tax providing the donor does not die within seven years of making the donation.

Whilst the Child Trust Fund (CTF) is being phased out by the coalition government, it is still a valid savings solution for many parents and their children. All children born between September 1st 2002 and January 2nd 2011 were eligible to start a child trust fund if they were paid any child benefit before January 3rd 2011. For those who have already opened an account, payments can still be made into it until the child turns 18. The trust benefits from a starting contribution from the government of at least £250 (except children who first received child benefits after August 2nd 2010 who will receive £50 only) with the possibility of further contributions for children in low income families. All income and gains from the CTF will be tax free although the contributions made by parents (or any other donors) must not exceed £1,200 in the tax year. The funds are held in trust for the child and although they can take over the management of the fund when they turn 16, they cannot withdraw funds until they turn 18 years of age. At which point they will also be able to transfer the funds to an ISA to protect the tax exempt status.

The coalitions government’s replacement to the CTF is the Junior ISA which is due to launch in the Autumn. The Junior ISA will not receive the government contributions that the CTFs benefited from however it will allow parents to save on behalf of their children and take advantage of the tax exemptions and investment choices that adults can currently benefit from with conventional Cash ISAs and Stocks and Shares ISAs.

There are a few other savings solutions for children which should be mentioned including the National Savings and Investments’ (NS&I) Child Bonus Bonds and Index-Linked Savings Certificates. These plans also benefit from tax exemptions but differ in the terms for which they run and how the income is generated.

Having outlined the available options for Child Savings and their advantages, time should also be spent considering why it is beneficial to save for your child’s future.

The recent fracas that has surrounded the coalition government's revamp of the tuition fee structure has brought the issue sharply into focus for many parents who must now be wondering how they will give their children the best possible foundation to make the most out of their higher education and deal with the financial consequences when they come out of the other side. One thing that seems certain is that tuition fees are here to stay in some shape or form as all three major political parties in England at least have backed a incarnation of the fees.

For many of course, University may not be may not be the primary consideration. It could also be argued that, even if it is, should the policies surrounding tuition fees remain as they are today, the nest egg you save for your child would in fact be best used to lay the foundation for their post university lives. Therefore attention turns to equipping your children for their professional adult lives.

The current climate means that it is harder than ever for first time buyers to get onto the property market. The days of easily obtained 100% mortgages have gone and financial institutions (and the public) may be wary of them being re-introduced due to the troubles of the credit crunch and subsequent recession. The focus has really come back onto having a substantial deposit. Whilst prices have come back down to some extent they have not fallen drastically and will no doubt creep back up the stronger the economy gets. Arguably the difficulty for first time buyers to get onto the market only seems likely to increase. Meanwhile, with oil prices rising, and consequently the cost travel, food etc, there are plenty of reasons to give your children the best head start possible whn the time comes.

Having painted a slightly gloomy picture of the prospects for our future generations you may wonder whether you can accumulate an amount which will really make a difference, especially at a time when budgets are already being squeezed by the cost of living. It is worth emphasising therefore that a little amount can go a long way. The earlier you start Saving for Children the greater the potential for growth that those savings have. What’s more, any amount will start your child’s adult life on a positive footing rather than encouraging them to begin in debt.