Making a medium to long-term investment for your child is exciting as a parent. In particular, when it comes to breaking the news that money is waiting for them on their 18th birthday in the form of a Junior ISA or Child Trust Fund.
About Child Trust Funds
The Child Trust Fund initiative was launched by the Government back in 2005 as a way for parents to save towards their child’s future. Parents of children born between the 1st September 2002 and the 2nd January 2011 were given a voucher from the Government. This monetary voucher was then used to start a Child Trust Fund account and contributions could be paid in by friends or family. The scheme ran for six years until it was replaced in 2011. For more information, please read our 'What is a Child Trust Fund?’ article on our website.
About Junior ISAs
Junior ISAs are child savings accounts that were set up by The Government as a replacement to Child Trust Funds. For more information, please read our 'Guide to Junior ISAs' article.
The important part...
Children who have a Junior ISA or a Child Trust Fund will be able to access the money put away for them once they reach age 18.
The first children with Child Trust Funds will be turning 18 from the 1st September 2020. Your child’s 18th birthday may be very close to this date, or they could be part of the group born as late as the 2nd January 2011. Some of you may have already transferred their Child Trust Fund into a Junior ISA, so you may need to explain this to them if they are asking why they do not have a Child Trust Fund like their friends.
At Foresters Financial, we look after more than one million children’s savings Plans, which includes Child Trust Funds and Junior ISAs. We pride ourselves in looking after these investment plans where parents, families and friends across the UK may have added to these accounts and helped save for the child’s future.
Whatever the age of your child, we want you to be prepared to explain to them all they need to know about their Child Trust Fund or Junior ISA. As their parent (or guardian), the child is likely to turn to you for help and guidance surrounding the investments made towards their future.
With all this information in mind, the question is this – how do I tell my child about their savings?
The money you may have contributed, along with family and friends, paying investments into a Child Trust Fund or Junior ISA can be used to allow your child to save for something exciting. It is important to stress how the money you put away can go towards bigger outgoings as they grow up. This could be paying for driving lessons, a first car, university fees, a deposit towards buying a home, saving towards a holiday or even for travelling around the world as part of a gap year! No matter what the value of the Child Trust Fund or Junior ISA, the money invested can either make a useful starting point for their own savings plans, or some of the whole amount could be used for anything like driving lessons or university costs.
Regardless of how old your child is now, you may want to make them aware of their Child Trust Fund or Junior ISA, especially in the lead up to their 18th birthday. This is because they will be able to access their fund and decide whether they wish to withdraw the money, continue investing or a mixture of the two.
We have put together a few fun and creative ways to tell your child about their savings, whether this is in a Child Trust Fund, Junior ISA or any other type of saving which you have been keeping for them.
Set the scene
If you know when you wish to tell your child about their Child Trust Fund or Junior ISA, set the scene perfectly to grab their attention to make sure they listen. For example, you could order their favourite takeaway or make their favourite dinner for the evening you wish to give them the news – they will be extra happy and ready to listen to you!
Give them a money lesson
Your child may not have much understanding on how to manage money. By sitting them down and showing them a few simple life skills, such as how to view a bank statement or how to create a budget, they may feel more prepared and responsible than you could have imagined!
They may be excited by the thought of becoming older or they may find it daunting but be willing to learn more about managing their finances.
When you think they are more ready, they will be delighted to hear about their savings waiting for them on their 18th birthday and feel prepared and organised for what decision they will take. For more information on how much your child’s dreams could cost and the savings they will need in place to achieve these goals, please read our article ‘The costs of becoming an adult’.
Make them a pay slip or a fake cheque
Your child may be at the age where they have their own part-time job or receive pocket money from you for helping around your home with chores.
Creating for them their very own personal pay slip could be a creative way to get them excited and prepare to talk to them about how to manage their money as it starts to build up.
You could also present your child with a fake cheque which shows an approximate figure of the value of their Plan. This could get them thinking about the choices they wish to make, and they will learn approximately how much has been put away into the savings they will access at 18. Although this may seem a little old-fashioned, you could have lots of fun with making a giant fake cheque for your child. Just make sure you mention that they will only have access to any money saved into their Child Trust Fund or Junior ISA when they reach 18.
If your child has recently started their first part-time job, you could get them a card congratulating them for their success and break the news about their Child Trust Fund or Junior ISA – they will have your full attention!
Hopefully this approach could help encourage your child to save the money they are receiving from their part-time work or pocket money.
Get them a piggy bank (or more!)
This can be a great way to get your child involved with handling money from a young age and, if you’re not keeping the Child Trust Fund or Junior ISA a surprise, you can encourage them to save into a piggy bank. This money can then be added to their Child Trust Fund or Junior ISA.
They can contribute their loose change, such as 1ps, 2ps and 5ps, and cash your child receives from you or on their birthday from family and friends. When the piggy bank is nearly full up, you can take your child to the Post Office or local bank and change the money into notes. Once this is done, you can tell your child you are putting this into your bank account so you are then able to transfer this into the Child Trust Fund or Junior ISA!
Knowing how such little change they added into the piggy bank could be worth as much as £10 or even £20 is an exciting way for them to realise how far saving can get you!
Of course, you don't have to use a piggy bank - you could also use a terramundi savings pot (one you have to smash to get into) and get your child saving even more money.
Key tips to follow for telling your child about their savings
Whatever decision you make with how you wish to tell your child about their Child Trust Fund or Junior ISA, we suggest you bear the following in mind:
1. A letter will explain they have a Child Trust Fund
If your child has a Child Trust Fund plan set up, HMRC will send your child their National Insurance Number before their 16th birthday and within this letter, there is a brief mention of your child having a Child Trust Fund. This is a great opportunity for you – as a parent – to sit down and speak to them about the savings they have waiting for them on their 18th birthday. However, if you have been keeping this a secret from your child, make sure HMRC do not spoil the surprise! They may also hear about Child Trust Funds in the news, from their friends or schoolmates, or from the Child Trust Fund providers who may have to write to the child before their 18th birthday, depending on HMRC regulations. If your child’s Child Trust Fund was transferred to a Junior ISA they will still be told they may have a Child Trust Fund – so you will need to explain this to them.
2. Keep it simple
Try not to confuse your child by going into the ins and outs about their Child Trust Fund or Junior ISA. If they are old enough but have not opened up their own bank account yet, this will probably be the first step to take before explaining they have a savings plan waiting with money inside! Tell them to look at these savings as an exciting opportunity in their life – they will soon be able to start earning themselves, managing their money regularly and taking responsibility with their finances.
3. Don’t be disheartened
If your child was eligible for a Child Trust Fund it is highly likely they may hear about this from their friends or schoolmates. You may find it disappointing that they did not hear from you first but take it as a positive – if your child hears from a trusted friend, they may be even more engaged and excited to find out more about their Child Trust Fund! If you’re afraid of their friends spoiling your surprise, this could be the perfect opportunity to talk to them earlier about everything they need to know about money and their Child Trust Fund.
4. Build up the excitement
As a parent or guardian, you may find it rewarding to get your child excited about the money waiting for them in their Child Trust Fund or Junior ISA. If you know your child wants to go to university, go to open days with them. If they want to save for a car, inform them about car insurance and show them some suitable cars for first time drivers. When they discover they have a Child Trust Fund or Junior ISA waiting for them on their 18th birthday, it will be very rewarding as a parent to see them happy and full of excitement!
5. Prepare for a few questions
Since the Child Trust Fund or Junior ISA was set up as a long-term savings plan towards your child’s future, they may ask why you kept it a secret from them after years of investing into their account. You should look to emphasise the value and importance of this money – you may not want it to be used by your child towards buying the latest phone or games console! It is money that can be used towards a better, brighter future, to give them opportunities and happiness they deserve as they become an adult. No matter what the value of the Child Trust Fund or Junior ISA is, every pound will make a difference for achieving their career goals and dreams.
We hope these creative and informative tips will help when you feel the time is right to tell your child about their savings.
For more information on how your child can access their Child Trust Fund at age 18, please visit our Child Trust Fund Information Hub on our website.