To encouraging a saving culture, the government gives all newborn children a minimum £250 in a Child Trust Fund. The working of this scheme is as explained below.

The government will give £250 to all newborn babies – and the amount will be £500 if the infant belongs to a low income family.

The money will be available to the child when they completed their age 18. During this long period of time it is anticipated that the Child Trust Fund (CTF) will have grown-up into a neat sum - possibly sufficient to craft a civilized contribution towards university tuition fees, occupational training or a deposit on a home etc.

Anyway, parents who looking to open a spread betting account on behalf of their child can only ignore this plan. Besides, the government has assured that it will make a one-off payment into all Child Trust Funds when children reach the age of seven. The amount of that sum has yet to be declared.

To take a closer look of the growth of this £250 is interesting. I am going to explain How far will £250 go?

It will fall an extensive way short of financial support a university education - mainly when you think about that the average student now leaves university with an amount overdue of more than £12,000.

Virgin Money says that if the full £500 was invested and grew at 7% per year the Child Trust Fund would be merit £1,410 after 18 years.

The idea is that supplementary assistance from friends and family will enhance the fund. So it be able to give young people a real head beginning.

If the family and friends will be able to donate up to £1,200 a year. What the Child Trust Fund could be merit?

£500 with 5% annual growth would become £1,000 in 18 years

£500 with 7% annual growth would become £1,410 in 18 years

£500 with 9% annual growth would become £1,970 in 18 years

Virgin Money calculate approximately that if parents , friends or grandparents refuel the fund to the tune of £10 per month the amount saved would raise to £5,210. And if parents paid their weekly child benefit into the fund, the fund would have grown-up to a extensive £27,000 after 18 years, presuming (an optimistic) 7% annual enlargement.

Another interesting thing about this fund is that, any enlargement achieved by the Child Trust Fund will be tax free. In contrast, those paying in to Child Trust Funds will not obtain tax liberation on their donations.

The government has also determined that present rules leading parental contributions to a child will not apply.

This is where a reward from a parent gives increase to income of more than £100 in a year and the parent is then taxed on all that income at their own tax rate.

Of course there are some boundaries on the scheme of investments in the Child Trust Fund .As I said earlier in this article, parents looking to open a spread betting account on behalf of their child can forget this scheme. Following the stock market collapse of recent years many commentators thinking that the government would bar parents from investing the money in shares. Because of the bad facts from the investment industry, the government has determined that parents can devote in either a deposit savings account or a stock market-based venture.

But remember that any stock market investment will have to be economical and not too dangerous.

Parents that do not devote the government’s gift within a year will have it invested for them by HM Revenue and Customs. The parent is free to assume liability for that account later at any time according to their convenience.

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