Positives and Negatives of the Child Trust Fund

finance

The Child Trust Fund is a government scheme introduced to encourage parents to save on behalf of their children. Depending on which way you look at the scheme it has both positives and negatives.

Those who are pro child trust fund claim that it helps people to save. This can be the case for both parents and children. Knowing that their parents are saving for them and that it works can get children to see the benefit. This can then encourage them to do likewise and continue to into adulthood. Many parents would not save on behalf of their children without the child trust fund. As they receive a CTF voucher and invest it for their newborn child it makes them think about the possibility of saving for their children. This may then encourage them to add the fund.

If the CTF has been added to throughout their childhood, once the fund matures when someone turns 18 they may have a decent sum of money available to them. The Child Trust Fund is only seven years old so it will be another eleven years before the first funds mature. 18 year olds wishing to go to university could be helped significantly. It may help them through their studies and mean they might not have to take on the large amount of debt that many young people do at present. This means money may not have to be the worry that it often is to people now, and they might not have to spend many years paying of the debt they have accrued.

Whatever they choose to do with the money, there is no doubt that if the Child Trust Fund has been embraced by their families and topped up regularly, 18 year olds could start off adulthood with a good start financially. There are several things they could potentially do with the money. It could, for example, help get them on the housing ladder, or it could just mean they have some spare funds it case they need it. It means money may not be such a worry.

Although there are certainly positives, there are ways that the Child Trust Fund can be perceived as a negative.

Many (including two of the three main political parties) claim that the states money could be better spend in other ways. The Liberal Democrats believe the money should be spent in other areas to help children. They think helping under privileged children should be more of a priority and that spending it on education and childcare would have a more significant impact in helping today’s children. £500 million is spent on the fund each year, which is undoubtedly a large amount.

With the current recession the amount spent by the government on this scheme seems even more significant. Many have the opinion that there are more important things to be spending this money on and that the Child Trust Fund should not be a priority. Is it an area where a large amount of state money could be saved?

In reality the scheme doesn’t help everyone. Not all parents are able or wiling to invest in the fund. And without extra investment it won’t be that affective. Some say it only helps children from wealthy backgrounds as their families can afford to top-up regularly. Poorer families have other priorities and less disposable income.

Some argue that 18 year olds are not always best placed to be given a significant (relatively speaking) amount of money. They could blow it all on a car or in the pub? Most would say that this isn’t something their tax should be spent on.

The Child Trust Fund is often debated. There are good points on both sides of the argument. All three main political parties have differing opinions on the scheme so it will be interesting to see what the future holds.

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