Key Findings:
- Yorkshire sees 20% rise in applications for cash Child Trust Funds in past month
- Parents leaving children’s savings in poorly performing Child Trust Fund accounts
- Using the proceeds for further education top choice for parents saving for their children
- Over half of parents are saving more into other savings accounts for their children
In the past month alone the Yorkshire has seen a 20% increase in parents opening a cash Child Trust Fund and with parents whose children were born after 31st August 2002 soon to be the first to share a second £150 million windfall as their children start turning seven in a few weeks time, Yorkshire Building Society is urging parents to take a closer look at the performance of their chosen fund to date.
Chris Edwards, Yorkshire’s Head of Savings & Mortgages said:
“Child Trust Funds have always been popular because parents like their simplicity and understand the concept but we’re not surprised by our new figures which show an increase in their take-up, as recent research has found that cash Child Trust Funds have proved to offer greater returns than stakeholder versions.”
Catching the savings habit
According to the Yorkshire’s own data, 41% of its Child Trust Fund savings accounts have been contributed to with the average amount added being £266² but over half of all parents (52%) who have children eligible for a Child Trust Fund do not realise that they can transfer to another provider.
A little saving soon adds up
Parents wanting their children to have a sizable savings pot in their Child Trust Fund when they reach 18 need to start the savings habit early. The good news is that saving little and often soon adds up. Just £10 per week saved in a Yorkshire Building Society cash Child Trust Fund from birth would be worth approximately £11,740³ by the time they reach 18.
Chris Edwards, Yorkshire’s Head of Savings & Mortgages said:
“Child Trust Funds are a really good way for parents to save for their child’s future. However, we’re urging parents who have existing Child Trust Funds or those who are in the process of choosing a provider, to shop around for a good deal. Just £10 per week saved in a Yorkshire Building Society cash Child Trust Fund since they were born would be worth approximately £11,740 when the child reaches 18 but a provider paying just 1% less in interest would mean that they would get just £10,870, an £800 reduction in lost interest over the duration of the fund4.
“Our research also shows that over half of parents are saving more money into other savings accounts for their children rather than their Child Trust Fund. It’s great news that parents are doing this for their children but often these other accounts pay less interest than a Child Trust Fund, which could cost them dearly over 18 years.”
Choices when opening a Child Trust Fund Savings Account
When parents are choosing a Child Trust Fund provider it comes as no surprise that the rate and whether the provider is a well known brand, influences the choice of parents with just over two thirds of parents citing these as the main factors in making their decision.
Choices at 18
According to Yorkshire’s research, when children have access to the fund at the age of 18, parents would ideally like their children to put the money towards further education but many parents are happy for them to spend it on whatever they choose (see below). The research also unearthed that some parents would like their children to use their entrepreneurial skills and use the proceeds setting up their own business.
