Child Trust Funds are due to start maturing today and millions of children who received a handout from the government have benefited from their parents choosing to invest in stocks and shares rather than cash.

Launched in 2005, the first Child Trust Funds are starting to mature this month when the oldest group of children turn 18 and gain access to their accounts. HMRC say around 55,000 will mature each month.

When they were opened, parents had the option of choosing to invest in cash or funds that invested in stocks and shares.

Of the 6.3million Child Trust Funds opened for children born between September 2002 and January 2011, around 4.84million of them were invested in funds that invested in stocks and shares, but more than a million were invested in cash.

And those families who invested in shares are likely to have seen better returns.

£250 invested in April 2005
Returns
FTSE All-Share
£590.34
Cash
£319.40
*Figures from FE 01/04/2005 – 28/08/2020

Sean McCann, Chartered Financial Planner at financial advisers NFU Mutual, said: “Many play it safe when it comes to investing for children and keep the money in savings accounts, but families who invested in share based funds may be surprised by the returns they’ve made.

“These figures demonstrate the longer-term potential of the stock market and how taking more risk can produce better returns when investing for children.

“Despite the credit crunch of 2008 and the financial downturn this year, many Child Trust Funds invested in shares have still outperformed those invested in cash.

“One of the aims of the Child Trust Fund was to help children understand the benefits of longer term saving and investment.

“Thousands of teenagers will start receiving this money in September, and when they take control at 18 they can move some or all of the money into an ISA and continue to benefit from any future growth.” 

If parents didn’t invest their child’s handout, the government did it for them. You can trace a lost Child Trust Fund, by logging onto: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/child-trust-fund