What is a Child Trust Fund?
Types of account
There are two types of Child Trust Fund that you can invest your child's money into; a cash fund where the money is held in a traditional bank/building society account or an equity stakeholder fund where the money is invested in company shares (equities).
Equity Stakeholder Child Trust Fund
This is not a bank/building society account. It invests your child’s money in equities.
Stock market-based investments have the potential to provide a higher return than savings accounts, if you invest for a long time. This is because although stock markets tend to go up and down in value, the stock market’s value over a long time period has tended to rise more than it falls. But remember, no matter how well an investment has performed in the past, this is no guarantee of how well it might perform in the future as this depends on market conditions.
Investing in the stock market is more risky than putting money in a savings account as the value of shares can fall. However, as the Child Trust Fund is a long term investment, there may be time for any fall in value to be recovered. Indeed, analysis of stock market performance over the last 40 years shows that, in any 18-year period, an amount invested in stocks and shares has grown by more than the same amount of money left in a savings account. (Source: )
Cash Child Trust Fund
This is a tax-free savings account paying a variable interest rate. As it’s a pure savings plan, it’s secure – your child is guaranteed to get back every penny invested, plus interest and any bonuses paid, when they reach 18. Remember, though, that unlike our other savings accounts, no one can make any withdrawals until your child’s 18th birthday.
Choosing the right account
Both types of account are available through Nationwide. To open a CTF account you must choose either a cash or equity stakeholder CTF. For full information on your options please read our