Magazine article The Spectator

Why Bother to Save for Your Baby?

Magazine article The Spectator

Why Bother to Save for Your Baby?

Article excerpt

There is a popular book for new parents called What to Expect the First Year by Arlene Eisenberg. In the chapter on what to expect during the third month there is a list of things your baby should be able to do. One of these is 'pay attention to a raisin or other very small object'. This seems innocuous but it is the exactly the sort of thing that induces panic in a firsttime parent. Scores of sleep-deprived novices, keen to make sure their little ones are developing as they should, routinely spend hours trying to persuade reluctant babies to concentrate on raisins when they would much rather be sucking their fingers or staring at ceiling lights.

Being a new parent is a worrying business, and new worries are constantly added to the list. For me, last week was raisins; this week is the Child Trust Fund.

The promised £250 certificate for our new baby girl has just arrived from Gordon Brown, along with a booklet encouraging us to invest it and top it up to the maximum £1,200 a year so that it grows to a worthwhile sum by the time our daughter is 18.

But how on earth should I invest it?

The answer is not simple but luckily, as I pace the corridor with a grizzling baby on my shoulder night after night, I have plenty of time to think about it. My first conclusion is that I will not be topping up my baby's CTF. She has already shown herself quite contrary and no doubt she will become more so, not less. So far our disagreements are minor (I think she should have an afternoon nap, she doesn't) but when she is 18 things will get more serious. What if I think she should spend the money -- which I have saved but she can spend as she wishes -- on university fees and she thinks she should spend it at Topshop? The tax breaks on a CTF are great (no income tax, no capital gains tax) but I'm not sure that's enough to make me want to place my money at the whim of a teenager.

That said, I am of course going to invest the £250 we have just received, plus the second £250 she will get when she is seven.

But I am not going to do so prudently.

There are three ways of investing your CTF money. You can put it into an approved savings account, into what's called a stakeholder account (where it is initially invested in equities, then shifted to less risky investments as the child gets older) or into a shares account invested in the equity markets for the full 18 years. …

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