The scrapping of child trust funds hands back the burden of saving to parents

Child trust funds are to be scrapped by the government from January 1st 2011. However the need to save for our children’s future has never been greater. We consider how this can be achieved.

Since 2002, the child trust fund has provided the parents with £250 to start a savings fund for their new born children. If they wished, parents could add up to £100 a month to the fund until the child turned eighteen.

Depending on the levels saved, the fund’s value could have been anything between £8000 and £30,000.

For many families, this money would have provided an opportunity to fund further education or perhaps given a step onto the housing ladder.

Sadly, this help for families will be stopped from January 1st 2011 as part of the governments cost cutting measures. The full burden of saving for their children’s future has thus been handed back to parents.

Saving for the future

Most parents want the best for their children and this normally includes the best education. However, the cost of further education, especially gaining a university degree, has gone through the roof in recent years.

It is now widely accepted that the average debt incurred by a student after three years of university is between £15,000 and £20,000.

Graduates are often saddled with this debt for years as they also struggle to fund the cost of living even after entering work.

A sensibly funded child trust fund could have had a massive difference to reducing these debt levels. Now the scheme is no longer available, parents who still want to give a head start to their children will have to make saving a priority as never before.

Saving tips

Saving what may seem to be a relatively small amount on behalf of your children now can reap significant rewards. Putting just £20 a month into a well managed fund could generate around £7000 by the time your child turns eighteen.

But putting money aside is not easy in today’s economic environment. For this reason, if you want to save, you have to plan to save.

The first thing to do is calculate what you can sensibly afford to save.

Review your income and expenditure by listing everything on paper and take a realistic view. There is no point in committing to save an amount which is unaffordable, it just will not happen.

Once you have worked out how much you will save the best advice available is do it at the beginning of the month.

What I mean by this is that the amount you save needs to be put aside as soon as your wages or other income hits your account. If you wait until the end of the month, it is a foregone conclusion that the cash will not be there.

Even money that you have budgeted to save has an uncanny knack of being spent if it is left available in your current account. However, if you put it away at the beginning of the month, it will not be missed.

The old saying “out of sight, out of mind” has never been truer than when talking about saving.

The scrapping of the child trust fund scheme is an unfortunate side effect of the government’s cost cutting measures. Nevertheless, the need to save for our children’s future has to remain a priority.

But saving has never been easy and is currently especially difficult when faced with today’s harsh economic climate.

For this reason, if you decide that you want to start making saving for your children’s future a priority, planning what and when to save should now be top of your action list.

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