Loading ...Which type of child trust fund is best for my child?
Most parents opt for a stakeholder account, because these products have been specifically designed for the CFT savings scheme and as mentioned above, they are the Government’s favoured option. It is worth noting though, that not all stakeholder accounts are the same and performance does vary – it is therefore worth doing a bit of research before deciding which scheme to go for.
However, while the Government may recommend stakeholder products, this does not necessarily mean that you are wrong to opt for a non-stakeholder or cash account.
If you are a cautious investor and are not happy to take the risk of investing money for your child’s future in the stock markets, then you may prefer a cash account. Non-stakeholder CTFs tend to be most popular with experienced investors who are prepared to take higher-than average risk and a big advantage is that you have a much wider choice of where your child’s money is invested.
However, unlike stakeholder CTFs, these schemes are not ‘life-styled’ so the underlying investment is not automatically transferred into lower risk assets as the child reaches the age of 18. Also, there is no cap on the annual management charge so it could be higher than 1.5%. There may also be an initial charge to pay.
Don’t worry too much about getting the choice right first time – if you open an account and it doesn’t perform well compared with other schemes, or you decide you would rather your son or daughter’s money be invested elsewhere, you can switch provider at any time.
