Poorer Families not benefiting from Child Trust Fund

The Conservative party believe that poorer families are not benefiting from the child trust fund. The have said the majority of children who will benefit from the Labour introduced scheme will be those from wealthier families. This is based on statistics stating that 82% of parents who live in the richest ten areas of the UK have set up CTF accounts for their children, but fewer than 70% of those residing in the poorest ten areas have.

What are the reasons for this? It theory it is they who should be more keen to take advantage of the scheme as they could do with more government assistance. The Tories claim that many are unaware of the existence of the scheme, therefore suggesting that the government has done a poor job of publicizing it and educating people to its benefits.

It is possible, though, that it purely comes down to the fact that wealthier people tend to have more money available to them to invest. For the Child Trust Fund to be really beneficial it is necessary to invest further, with family and friends allowed to invest up to £1,200 per year. The original £250 voucher from the government shortly after a child is born, plus a further £250 voucher seven years later will not have a huge impact once a child turns eighteen. Therefore it is possible that many parents who cannot afford to further invest, don’t think it has any value, although it could be argued that £500 plus interest is better than nothing.

Many are in the situation of simply being unable to further invest. Feeding and clothing children now is more important than saving for their futures; many have no choice but to think about the present. By the time today’s children turn eighteen they may be earning themselves so providing for them now is more important. In a way not taking advantage of the child trust fund could be a missed opportunity. It is possible that taking full advantages could mean an eighteen year old could receive £24,000. But in reality the majority of parents are unable to invest anywhere near the £1,200 each year.

There is much debate as to the future of the child trust fund. The Conservatives have said that they will make the child trust fund only available to the poorest third of families, as they are the ones who need the help most. But considering the statistics that they have highlighted, would this be a positive solution? Although almost 70% of the poorest families do open a CTF account, many of these will not be regularly investing, therefore making the scheme relatively ineffective. It is the wealthier families who take full advantage, so it is likely better to either leave the scheme as it is or withdraw it altogether.

Andrew Marshall ©

The Child Trust Fund from Jump Savings is the choice of many parents looking to invest they CTF voucher.