CTFs and Isas not just for Christmas

Parents and financial advisers alike often express the desire for children to put a bit of money away when they're young and this month has been no exception, with the forthcoming Christmas holiday highlighted as an opportunity for kids to kick off a life of saving.

Major news in November was the announcement by the treasury of the success of the child trust fund (CTF) and the decision that children would now be able to convert their fund into a tax-free individual savings account (Isa) upon its maturity, a move backed by CTF providers.

Experts also supported the indefinite extension of the Isa system and the potential increase in the maximum investment in equity Isa's from its current £7,000 level, though there were also calls for more clarification on reforms and further changes to the system.

While Birmingham Midshires appealed for Britain to return to the savings culture of old, F&C reported that the CTF had already done its bit so far in encouraging children to save up for their future.

The company in fact felt the scheme was so successful that it called for the government to extend the scheme to allow all children under the age of 18 to have a tax-free savings account set up for them, not just those recently born that receive a government voucher.

Talk of CTFs investments beyond the starting voucher continued in November, with it being noticed that Christmas is nearly upon us. The Children's Mutual reported that January saw an 80 per cent increase in lump sums invested into the funds, as children or their parents chose to invest their Christmas money.

Co-operative Insurance called these investments an "ideal" Christmas gift, recommending putting some money away as a financially astute alternative to shopping stress and wrapping paper clutter.

The reasons for all this saving were highlighted later on in the month, with Britannia reporting that first-time buyers who start saving earlier on in life would get a double-bonus, firstly having a tidy lump sum they could use as a deposit and secondly, getting into that saving habit they'll need for making those monthly mortgage repayments in the future.