Preparing for the future

As a new parent, you'll want to make sure the foundations are in place for a strong financial future for your child.

There are a number of ways to save for your child's future, providing you can afford it. However, there are a few things you should understand before you start in order to get the maximum possible returns on your savings.

Child Trust Fund

This is a Government savings and investment account for children. Children born on or after 6th April 2005 will receive a 250 voucher to start their account shortly after Child Benefit has been claimed and starts being paid (and families on low incomes may receive a further 250). You can then make further contributions of up to 1,200 each year.

When the child is 7 years old, the Government will make a further 250 contribution to the Trust Fund - and lower-income families will receive another additional 250.

Your child can access their Trust Fund savings once they reach 18 years of age.

It's also worth noting that there are different types of Child Trust Fund (invested in different ways, meaning they could yield different returns). For more information, visit the official Child Trust Fund website at http://www.childtrustfund.gov.uk/.

Other savings accounts

Because there is a 1,200 annual limit on what you can put into a Child Trust Fund, you might want to consider a separate savings account for any additional money you want to put aside.

There are many ways to do this, but in general, you'll want to find the savings account with the highest interest rate and the least tax.

One option is an ISA - tax-free savings that allow you to deposit up to 7,200 each year.

ISAs are only available to people of 16 years or older, so you won't be able to set one up in your child's name - but there is no reason why you can't set up an account for them in your name.

In some cases, however, you might find that you can get a better interest rate on a regular savings account. To make sure, it's well worth looking around to see what the different banks have to offer. There are a number of comparison websites online that can help you to do this quickly and easily.

Go to Part 4 - Advice for working parents

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