Parents Are Saving More in U.K.’s Universal Child Trust Fund Program
By Dory Rand
Parents of children with government-supported Child Trust Funds in the
United Kingdom are increasing deposits and hoping that their children
will be able to afford homes, go to college and start businesses when
they grow up, according to David White, chief executive of the
Children’s Mutual. The Children’s Mutual is one of 30 financial
institutions participating in the Child Trust Fund (CTF) program
launched in 2002 to strengthen the saving habit of future generations,
promote financial education, and ensure that at age 18 every child will
have access to a financial asset. The Shriver Center’s Dory Rand
learned the following promising results during a recent conversation
with White.
Parents are saving more with Child Trust Funds
“The CTF is a catalyst for families to save for their children,” said White. The Children’s Mutual holds 20 percent of the CTF accounts. Almost 25 percent of all CTF account holders are contributing about $42 per month via direct deposit. Among the Children’s Mutual CTF customers, about 40 percent are contributing an average of $48 per month via direct deposit into their CTF accounts. Before the adoption of the CTF program, only about 18 percent or 19 percent of UK families had child accounts, and the Children’s Mutual customers saved about $30 per month.
How the Child Trust Fund works
Parents open the CTF account for their child with the help of a £250 voucher (the equivalent of about $475) and an additional £250 deposit at age 7. Children in less well-off families receive larger deposits of £500. Parents, children, and others may contribute up to the equivalent of $2,400 per year in the tax-favored CTF accounts. The CTF funds may not be used until the child is at least 18 years old. The government also announced plans to rollover the CTFs automatically to long-term tax-favored accounts at age 18 to encourage citizens to continue to save.
The U.K. government has a long-term goal of increasing citizens’ financial capability over the next 10 to 20 years. As part of that plan, it developed a new curriculum on economic capability and announced on September 7 that it was significantly increasing funding for teaching financial skills based on the CTF in math classes in primary and secondary schools. “Financial understanding is a key life skill,” said Treasury Minister Kitty Ussher.
Lessons for the United States
“The U.K.’s experience in developing and implementing the CTF program and related financial education will be of great benefit to state and federal policymakers who are exploring the development of universal child development accounts in the United States,” said Rand. Illinois recently passed legislation creating a children’s savings account task force.
For more information, contact Dory Rand at 312.368.2007 or doryrand@povertylaw.org, or visit http://www.childtrustfund.gov.uk/templates/Page____1177.aspx.
Parents are saving more with Child Trust Funds
“The CTF is a catalyst for families to save for their children,” said White. The Children’s Mutual holds 20 percent of the CTF accounts. Almost 25 percent of all CTF account holders are contributing about $42 per month via direct deposit. Among the Children’s Mutual CTF customers, about 40 percent are contributing an average of $48 per month via direct deposit into their CTF accounts. Before the adoption of the CTF program, only about 18 percent or 19 percent of UK families had child accounts, and the Children’s Mutual customers saved about $30 per month.
How the Child Trust Fund works
Parents open the CTF account for their child with the help of a £250 voucher (the equivalent of about $475) and an additional £250 deposit at age 7. Children in less well-off families receive larger deposits of £500. Parents, children, and others may contribute up to the equivalent of $2,400 per year in the tax-favored CTF accounts. The CTF funds may not be used until the child is at least 18 years old. The government also announced plans to rollover the CTFs automatically to long-term tax-favored accounts at age 18 to encourage citizens to continue to save.
The U.K. government has a long-term goal of increasing citizens’ financial capability over the next 10 to 20 years. As part of that plan, it developed a new curriculum on economic capability and announced on September 7 that it was significantly increasing funding for teaching financial skills based on the CTF in math classes in primary and secondary schools. “Financial understanding is a key life skill,” said Treasury Minister Kitty Ussher.
Lessons for the United States
“The U.K.’s experience in developing and implementing the CTF program and related financial education will be of great benefit to state and federal policymakers who are exploring the development of universal child development accounts in the United States,” said Rand. Illinois recently passed legislation creating a children’s savings account task force.
For more information, contact Dory Rand at 312.368.2007 or doryrand@povertylaw.org, or visit http://www.childtrustfund.gov.uk/templates/Page____1177.aspx.
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