Important Tips for Child Trust Fund

If you are considering investing in a CTF account for your son or daughter, there are several things you should understand about how the fund works.

CTF Basics

The process is relatively simple. First of all, any child born on 1st September 2002 or later that receives Child Benefit will automatically be sent a voucher from the Government. As the child's parent, you can then decide where you would like to invest the fund on your son or daughter's behalf. You must choose from a list of select financial organisations. Once the fund has been invested somewhere, you can add money to it as you see fit. Money can be added in a one-off payment or as a monthly payment. You cannot, however, add more than £1,200 each year.

When your child turns 18, he or she will receive the contents of the fund in a lump sum payment. Under the current legislation, this sum will be completely free of all forms of tax. No amount of money can be withdrawn from the CTF account prior to the child's 18th birthday.

As the child's parent, you can choose to invest the money on your child's behalf in one of three types of accounts. CTF accounts can either be shares accounts, savings accounts, or stakeholder accounts. A shares account is an account in which the value of the fund is used to purchase shares which can go up or down in value over time. A savings account is simply an account where the value of the fund remains in cash form with fixed interest. Finally, a stakeholder account is an account in which the value of the fund is first used to purchase shares but then switches to cash with interest a few years before the fund matures.

New Legislation

Recent changes were made to the legislation regarding Child Trust Funds. In May 2010, the government announced that payments to such accounts would be reduced and eventually discontinued. As a result, only children born before January 2011 can qualify for these accounts. In addition, those children born between August 2010 and December 2010 will receive reduced Government vouchers.

Originally when a child reached age 7, the Government would make a deposit into the child's CTF account. However, under the new legislation, those children turning 7 after 31 July 2010 won't receive these additional payments. However, even under the new legislation all children born prior to January 2011 will retain their CTF accounts under the original rules even if they are not eligible for the full amount of Government vouchers. Parents, friends, family, and the child can all continue to contribute up to a total of £1,200 per year until the child reaches the age of 18, and no withdrawals can be made before this time.

Conclusion

For those families whose children were born during the appropriate time frame, the Child Trust Fund is an excellent way to ensure that your child starts their adult life with some security. The first deposit into the fund will be given to you by the Government, but where you invest the money and how much you add to it will be entirely up to you. You can choose to invest in three different types of accounts, and you can add up to £1,200 per year, but remember that no withdrawals can be made before the child's 18th birthday.

If you are interested in reading more information about child trust funds and investment plans then please visit the following links:

Scottish Friendly - mutual societies such as Scottish Friendly supply financial services products. Mutual societies are owned by customers, or members.

Association of Financial Mutuals - you can find out useful information about mutual and friendly societies by visiting http://www.financialmutuals.org/

Important Tips for Cash - Child Trust Funds

Child trust funds are a long-term investment strategy that allows parents, grandparents, friends, and virtually any interested adult, to ensure that a child is well equipped for a productive adult life.

The three types of child trust funds are

Cash child trust funds carry the least amount of risk to the investment. They are equivalent to a savings account. One advantage is that the interest is tax-free. Investing in cash CTF is the ideal scenario for those investors who realize the importance of saving for their child's future, yet do not want to utilize the stock market for such investment.

A Stakeholder child trust fund takes on somewhat of a higher investment risk than cash CTF, but usually earns a higher return. There are restrictions on stakeholder child trust fund to ensure that money is diversified. In addition, when the child is 13 years old, the investment is typically shifted to lower risk markets to ensure that the end of the CTF lifecycle will be rather stable.

A share-based CTF permits higher returns, but it incurs charges to manage such fund. Meaning that one can typically earn higher rates of returns because the investment is placed in riskier funds, but in order to shift the investment between funds, one must pay to have the CTF managed. Thus, a profit will not be realized until one deducts the appropriate charges that will be assessed. The share-based CTFs give investors two options upon opening the CTF. One option is to choose a couple of funds and shift the investment between the two at the investors' leisure. The other option is to choose from an unrestricted list of funds, and shift the investment accordingly.

The following useful tips can be applied towards either type of CTF:

In cash CTFs, monitor the interest rate. Make sure you are receiving the most competitive interest rate as possible.Keep in mind that any contributions to a CTF cannot be withdrawn until the child turns 18, and at that time, the child himself can only withdraw it.Be aware of up-front charges when opening a stakeholder CTF and share-based CTF.Remind friends and family members that they are able to contribute to a CTFUnderstand the risks before deciding against a cash CTFStart early. If one starts to invest early in a child's life, and chooses a stable fund, the long-term benefit will be realized.Be a savvy investor. Research, and study your options. Evaluate your particular situation i.e. realistic monthly contributions, etc., and make an educated decision based on that information.

If you are interested in reading more information about cash child trust funds and investment plans then please visit the following links:

Scottish Friendly - mutual societies such as Scottish Friendly supply financial services products. Mutual societies are owned by customers, or members.

Association of Financial Mutuals - you can find out useful information about mutual and friendly societies by visiting http://www.financialmutuals.org/

Important Tips for Savings and Investments

Below is a discussion of several important tips for savings and investments that can be considered when developing a saving plan.

Save Regularly

No matter how old a person is, it is important to put money toward saving and investing regularly, as the benefit of accumulated funds is one of the most important factors of wealth accumulation. Even if only a small amount of money can be set aside at a time, regular contributions to saving plans will grow over time and will result in the accumulation of funds. Additionally, many saving vehicles include the possibility of the benefit of compounded interest, which can translate into the growth of a saver's contributions over time.

Diversify

While saving cash is great, especially if the cash contributions are intended for a short term saving plan, it is important for the saver to consider several different saving vehicles. Saving plans available vary, but in order to take advantage of the many benefits available, diversifying with several different strategies is most desirable and may result in even greater saving. Each financial portfolio should include safe, conservative options for the security of funds, and more aggressive options for growth opportunity. Not every investment type is right for everyone. It is important for the saver to consider his or her risk tolerance and long term financial goals.

Take Advantage of Tax Benefits

There are many programs and benefits available that will reduce the amount of taxes that are paid on a saver's income. The best advice is to seek out the investments and savings plans that offer the greatest tax benefits. Over time, these plans can result in great saving and lead to great financial growth.

Plan for the Long Term

Whether a person begins saving in the teenage years or as an adult nearing retirement age, the priority should be placed on a long term perspective. It is important that short term funds are available in case of emergency, but by committing to a disciplined approach to regular saving that is diversified and takes advantage of tax benefits, the funds will automatically be there in case of a financial emergency.

It can be challenging for families to find extra money to contribute to a saving or investment account. Living a lifestyle within, or even below, one's means may be required to achieve financial independence. It is crucial, however, that a specific plan is in place for an individual's financial security. Research into the many different options available should be conducted and it would be prudent to consult a financial professional for guidance.

By using the above tips, the average person can be confident that their money will grow over time and provide for his or her family needs. The most important tip, however, is to be disciplined and consistent. Only then can the greatest rewards be reaped.

If you are interested in reading more information about savings and investment plans then please visit the following links:

Scottish Friendly - mutual societies such as Scottish Friendly supply financial services products. Mutual societies are owned by customers, or members.

Association of Financial Mutuals - you can find out useful information about mutual and friendly societies by visiting http://www.financialmutuals.org/

Important Tips for Child Savings Bonds

Children are guaranteed to receive a minimum amount when they withdraw their investment. This guaranteed minimum provides the investor with a sense of security opposed to high-risk options where profits are virtually never guaranteed.

Child bonds give an investor the flexibility of contributing a very modest monthly contribution. In times where the economy may be uncertain, the option of contributing minimal amounts is attractive. Conversely, child bonds allow one to make a lump sum investment, allowing the investor may choose to pay the monthly premiums in one lump sum. This will have the same effect as if one were contributing their monthly premiums. This option is ideal for grandparents who may want to make one contribution as a gift or at birth.

Child savings plan are somewhat different. They allow investors to open the account at any time. There are two types of child savings plans. One type is designated in the investors name, and gives the investor complete control of the investment. The investor can close the account, and withdraw from it at any time. The other type is a trust account. A trust account is held by a trustee. The trustee has complete control over that account until the child reaches 18 years old. The investor in this type of account does not have the ability to withdraw funds or close the account.

Whether one chooses a savings plan or a savings bond, a child's future financial stability is vital to their success in adulthood. Either option works toward the goal of securing long-term success.

The following useful tips and inquires will allow one to choose the investment that is most appropriate:

Determine what you are comfortable contributing to the account. Will it be a lump sum investment or monthly contributions?Determine if access to the funds is important to you or if you are willing to relinquish access until the child reaches 18.Be aware of any charges that may be assessed to the account. Some are assessed when changes are made to the account, and some are made on a regularly basis.Encourage friends, and family members to contribute.Start investing early in the child's life. The child savings plan allows investors to withdraw funds if necessary.Be a well-informed investor. Compare interest rates to determine which company will offer the best return on investment.Research your options. Evaluate your individual circumstances, and make an informed decision based on your circumstances.

If you are interested in reading more information about child savings bonds and investment plans then please visit the following links:

Scottish Friendly - mutual societies such as Scottish Friendly supply financial services products. Mutual societies are owned by customers, or members.

Association of Financial Mutuals - you can find out useful information about mutual and friendly societies by visiting http://www.financialmutuals.org/