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Child investment considerations

Advice on what to consider when choosing the best investments for your child, with information on savings accounts, child trust funds, bonds and investment plans.
Before deciding which child savings or investment option is most suitable, you need to take into account a number of factors:
  • Timescale: find out if the investment is suitable for the timescale you require, short term or long term.
  • Accessibility: if you think the money may be needed at short notice, make sure there are no withdrawal penalties.
  • Risk: Depending on your attitude to risk and the product you chose you may get back less than the amount you originally invested.
  • Charges: even if you are saving only a modest amount, it is important to ensure that you are not paying excessive charges.
The Government did introduce a 'child trust fund', a tax-free savings account into which Government 'endowments' were to be paid at birth and at ages 5, 11 and 16. Government contributions were at least £250 at birth and up to £500 for children in lower-income families. However the child trust fund scheme is now closed and this type of account is no longer available.

Short term schemes such as deposit accounts and cash ISAs are incredibly popular for many reasons. Most provide the flexibility of instant or short-notice access. But the real attraction is that they attract little or no risk to your money.

Unlike stockmarket investments which may erode your capital, low risk savings will preserve the money you pay in, even when the economy is in the doldrums. Their returns may not be as exciting as higher risk investments but they can deliver steady interest.

There is a good reason why longer term investments are usually able to provide impressive returns. And that is risk.

Exposing money to increased risk can bring much higher rewards. The key to investing successfully is to understand and be comfortable with the risk attached to your investment vehicle and to be prepared to commit your cash over the mid-long term so that the effects of any ups and downs in the stock market can be evened out.

Unless it specifically says so, an investment return is not guaranteed. But if you are prepared to run the risk of your capital being eroded in the bad times then you can almost certainly reap great rewards during the good times.

Visit, which is a comprehensive personal finance website, to find suitable investment companies.
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