CTFs: Five tips on what to do with the money
1 September, 2020
1. Find the CTF provider
CTF providers are sending out statements just before a young person’s eighteenth birthday, showing how much the fund is worth and what to do next. If they haven’t received a statement, they should check who currently holds the money as the provider may not have their latest address. HMRC has developed an online CTF tracker to help people who don’t know who currently holds their money: https://www.gov.uk/child-trust-funds/find-a-child-trust-fund.
2. Take your time
There is no need to rush, as the money will be held for them in a protected fund until they are ready to decide what to do next. They should talk to friends and family before deciding whether to cash in or re-invest the money. And while the original voucher to open the CTF came from the government, parents or grandparents may have topped up the CTF over the years, and will have a view on what to use the money for. For vulnerable teenagers, there may be special arrangements. The current CTF provider or a financial adviser can also help.
3. Don’t leave the money in a bank account
If the young adult wants to cash the money in, they will need a bank account to transfer it to. With interest rates at record low levels, holding money aside in a bank account for any amount of time may not be a good idea.
4. Set goals
If they want to keep the money invested, they will need to think about how long for, what they are saving for (such as a house deposit, driving lessons, a student loan, etc) and whether they will want to add extra money over time. OneFamily suggests around three-quarters of young people want businesses to become more environmentally friendly and will avoid investing in unethical companies.
5. Do some research
They will need to find out if their current CTF provider can help them achieve their aims. If not, consider an investment provider who can, such as a friendly society who can invest long-term in a range of ethical options, or a building society if they plan to use the money soon.
A CTF is an exciting opportunity for a young person and for many it may be the biggest windfall they enjoy for many years, so it’s important they think carefully about what to do next.
Martin Shaw, CEO, August 2020