If your child was born before 1 September 2002 then they are not eligible for a Child Trust Fund. Luckily, there are many other ways in which you can save for their future. Before decided which is the best for you it is a good idea to answer a few basic questions.
Question 1: Why am I saving and when do I need the money?
If you have a young child then you may be saving for their university which could seem like a long way away! However you may also be saving for a birthday gift in less than a year.
For short term savings it is usually better to put your money into a savings type account where it earns interest without the risk of losing any of it.
For longer term savings it is usually better to put your money into stocks or shares. They are higher risk but will usually perform better over the long term.
Question 2: How do you feel about risk?
Are you happy to take a higher risk if it means that your child might get more back? Or are you not willing to lose any of your money under any circumstances if it means that your child might get less back?
Question 3: How much can you afford to save?
Are you able to set aside a regular monthly amount? If so, how much can you set aside per month?
Or would you rather only invest money in an ad-hoc way when you have a little bit extra around the house? If so, how much do you think you will have?
Question 4: Do you want to take advantage of tax savings, even if it means restrictions on the investment?
Some investments can be done in a way which saves tax, such as ISAs. Over the long term the tax savings can really add up, however, it may mean that your investment has restrictions such as a maximum investment or reduced access to your money.
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