CTFs choices and the savings culture

CTFs choices and the savings culture

Much attention has been paid to the child trust fund (CTF) this month, with some providers reporting an increase in uptake of the product in recent months.

Britannia announced a rise in parents taking out non-stakeholder CTFs since the group raised its interest rates to 6.25 per cent and urged parents to make sure they're "proactive" in choosing their own provider.

The Building Society Association also reported on the popularity of cash-based CTFs, noting that while they account for just under a quarter of all CTFs taken out, that when given the choice, 71 per cent of parents decided on a cash fund during September.

A difference of opinion was shown by Family Investments, who suggested that a stakeholder CTF would give parents the best return on their investment, with many parents underestimating how much more a stakeholder fund could earn compared to a cash equivalent.

Parents confused about which sort of fund to take out for their children may have headed down to the Baby Show at Earl's Court in London towards the end of the month, where representatives from HM Revenue and Customs would have answered all their queries.

The reasons for parents to take out a CTF came under discussion again this month, with concerns over the costs of inheritance tax and effective methods to plan for them again rearing their head

AA Savings found that parents are increasingly worried that their offspring may well have to be "bailed out" when they leave home, such is their lack of financial security, but happily for the children, the overwhelming majority of parents assured the pollsters that they wouldn't turn their kids away.

The idea that the CTF could change all this was raised more than once this month, the thought being that by kicking off a savings fund nice and early, children would pick up the knack of saving and keep it throughout their lives, ensuring a much happier financial future.

Parents agreed with this according to studies published this month, which showed that adults feel children would do well to save from an early age for the major purchases in their lives, such as their first home.

The hope from some was that CTFs in particular could help foster this savings culture, while the savings mood was reported to have increased during 2006, attributed to inflation and interest rates, with it being noted that many people who take out CTFs go on to look into other savings vehicles.