By 
Teenagers across the country are in line to receive a cash windfall as they reach their 18th birthday, thanks to an often forgotten government scheme.
Child trust funds were established at the start of the century to give newborn babies a nest egg that they could access on adulthood. The scheme was the brainchild of Gordon Brown during his time as Chancellor of the Exchequer and applied to all children born on or after Sep 1 2002.
The state gave each baby £250, which could be saved in cash or invested in the stock market. Parents could make their own contributions or leave this nest egg to grow on its own.
Fast-forward to today and the first batch of accounts is about to mature. There are huge sums of money in these funds, yet many parents have forgotten their existence.
A Freedom of Information request shows that policies worth a total of £700m will end next year, and that £7.5bn is held in accounts that will mature over the next decade.
However, many parents have expressed concern about their offspring being given huge sums of cash on the day they turn 18. Sarah Jones, a digital executive from Hampshire, is one mother who has concerns about her child’s account maturing.
Credit:
Paul Grover
Ms Jones, 39, had paid into her daughter Anna’s account since her birth, building a £2,500 savings pot. However, on her next birthday, Anna, now 17, can access the cash, and her parents will have no say over how she spends it.
“I contributed every month after she was born, but not too much,” Ms Jones said. “I didn’t want her to have loads of money that she could potentially spend in the wrong way.
“I was a young mum. I was only 23 when I had her and I didn’t handle money very well at that age because I wasn’t mature enough.”
Ms Jones said she would have preferred the account to mature at age 21 or older. She plans to pass on other money that she has saved for Anna when she reaches that age.
For the child trust fund, her only option has been to ask her daughter to spend it wisely. “Anna has no intention of saving the money in any way; she has already spent it in her head,” Ms Jones said. “But we’ve now had a good chat about it and she wants to put the cash towards a car. At least she is not going to party with it all.”
Heather Owen of Quilter, a financial planner, said many parents would be worried about their children receiving a large windfall at such a young age.
“Gaining responsibility for thousands of pounds on your 18th birthday is a great opportunity, but may also be quite daunting and potentially even put people at risk if they waste it on bad habits,” she said.
Ms Owen advised teenagers to consider saving the cash to help meet living costs at university or to put towards a property deposit.
Child trust funds were axed by George Osborne when he was chancellor and children born on Jan 2 2011 will be the last to benefit.
They were replaced by the Junior Isa, although this offers no government contribution. Junior Isas also become fully accessible once the child turns 18.
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