In a survey of 16 to 18 year olds by Baillie Gifford, 69% would choose to spend a lump sum of £10,000 from their child trust fund, rather than invest or save it.
This re-enforces the idea that children are not responsible enough to invest and save when they gain control of their child trust fund. The company have recommended that parents would be better off opting for a child's saving plan where they have control over the money, rather than let their children go on a spending spree when they gain control at 16.
The research also found that there was a lack of knowledge about financial products and where best to invest their money. Over seventy per cent had no understanding about National Savings & Investments products, and only 11% of collective investments. Banks and building societies offered the best option for saving, according to the survey, with 81% having a reasonable understanding of their savings products.
Our view
We maintain that the Child Trust Fund is doomed to failure. It will not solve the savings crisis and it will not encourage the younger generation to save.