Martin Lewis is a TV presenter and journalist, as well as being the UK's only professional money saving expert. From his website moneysavingexpert.com he provides unbiased advice how to make the most from your money. Here he gives iVillage the low-down on Child Trust Funds

It's slightly more spin than bonanza, but finally the vouchers for the government's Child Trust Fund (CTF) contribution have arrived. All babies born after 1 September 2002 are entitled to a lump sum that will be locked away until their 18th birthday. So how can you insure they get the best possible returns on their money?

Those with household incomes over £13,480 get a £250 voucher per eligible child (plus interest for babies born before April 2005) and those earning less, £500. More cash is due when kids reach seven, but the amount hasn't been decided yet.

Can money be added to the Government's contribution?
You can add a total of up to £1,200 a 'year' to the Government contribution. The year starts on the child's birthday (apart from the scheme's first year, when it starts at account opening and ends the day before your child's birthday).

All savings put into CTFs are free from both income and capital gains tax although technically, inheritance tax rules do apply, but unless it's large gift from a grandparent, this is likely to be irrelevant.

Who opens the Fund?
Parents of qualifying children should have received a voucher and information pack. Those with new babies should receive them soon after the birth.

The choice and ongoing control of the investment belongs with whoever has parental responsibility, and passes to the child itself at the age of 16.

Is it worth adding to the CTF?
On the surface this is a tax-efficient scheme, so it's a good idea. Yet it has two major drawbacks.

The money goes direct to your child. Babes in arms now can grow to be rebellious 18-year-olds. The CTF goes straight to them. Your savings for their college fund may be spent in a day on a Playstation, world trip or some darker purpose. It is their money, you can't stop them
This scheme comes from a political agenda and opinions change. It's unlikely any party would be brave enough to reclaim the cash, but the rules and regulations could morph over 18 years

The CTF is a useful place to stash some cash, but it's probably best not to dunk it all in there.

ivillage uk

Child Trust Funds