And now for some good news! Were you born between 1 September 2002 and 2 January 2011? If so, there could be a tax-free savings account in your name and more than £2,000 inside, waiting to be claimed!
The government is urging thousands of 18-22 year olds (670,000 plus) to claim their Child Trust Fund and cash in their stash as HM Revenue and Customs (HMRC) reveals the average savings pot is worth £2,212.
"Young adults, facing horrible pressure from rising prices, could have an average of around £2,000 with their name on it that they know nothing about. A system that was designed to give everyone a better start in their adult life is letting down those who need it most," says Sarah Coles, head of personal finance, Hargreaves Lansdown.
"There’s a good chance that a huge chunk of them never even knew they had a CTF, because of the 6.3 million accounts opened, 1.8 million of them were opened by HMRC after the parents didn’t make a choice," says Sarah
Who has Child Trust Funds?
CTFs were a government initiative, set up in 2002, to help kickstart good savings habits and provide children with a decent sum of money to take control of when they hit 16 and then access at 18. Each child received a voucher worth £250 (or £500 for those from lower income families), which their parents could choose to put into a cash account, or an investment CTF.
If the parents didn’t make a choice, the government put the money into an investment CTF for them. Friends and family could also pay into the account (up to an annual limit).
The scheme was scrapped in January 2011 – although children who already had an account kept it.
How can I find out if I have a missing Child Trust Fund?
If you think you were eligible for a CTF or have lost track of your child’s CTF, you can track it down via the CTF tracking tool on the gov.uk.
You'll need to sign in using the Government Gateway, or sign up for an account. Then you can fill out a form with your child’s details, and they will inform you of the provider holding your child’s CTF.
"If you didn’t get round to making a decision, the government would have chosen a stakeholder CTF for you. If you don’t know where that is, you can track down your CTF through the government website – as long as you have parental responsibility for the child," says Sarah Coles.
You can also use findCTF.sharefound.org.
Gavin Oldham, The Share Foundation, said: "It's easy and free to find out where your money is. We've linked more than 65,000 young people to their Child Trust Fund account."
If you know who the account is with, contact the CTF provider directly.
Don't use third-party tracing services!
Avoid using third-party agents offering to search for Child Trust Fund for you for a fee. It could cost you up to 25% of the value of your savings account.
Should I switch to a Junior ISA?
You cannot have a CTF at the same time as a Junior ISA, but from 2015 you have been able to transfer CTFs into a Junior ISA (JISA).
Feeding an existing CTF might feel like an easy option for putting away a nest egg for your kids - you already have the account, so you may as well make use of it - but in reality it's a missed opportunity.
"A CTF has much less to offer than a Junior ISA," says Sarah Coles. "The two accounts have the same tax benefits; the annual limit is the same; the money is still locked away until the age of 18; and it will belong to the child at that stage. However, the JISA has a number of advantages.
"If you’re keen to keep your money in cash, they tend to offer more competitive rates. At the moment five JISAs are offering more than 4.5%, including Nottingham Building Society at 4.85%. Meanwhile, the best CTF is actually offering a decent 4.8%, but most offer less than 4%.
" If you’re in an investment CTF, you may be paying over the odds in charges because stakeholder CTFs are essentially trackers capped at 1.5%. JISAs are usually much cheaper. Some wrappers are free, and the investments within them start from 0.04%. JISAs also tend to have much more choice over where to invest," says Sarah.
You can check out the best rate for Junior ISAs at comparison sites such as MoneySuperMarket and Unbiased - it's currently 4.8%!
To find out more about Child Trust Funds, visit MoneyHelper.
