Huge leap in teens’ awareness of Child Trust Fund payouts

(IFA Magazine)

 

Nearly 60% of 16-17 year-olds know about CTF money this year, compared to only 38% last year.

Nearly three in five (59%) of 16 and 17-year-olds surveyed know that, on their 18th birthday, they are due to receive a nest egg from their Child Trust Fund (CTF) or Junior ISA.

Recipients could take a cash lump sum or, if they want to build their savings or investments, can do so by rolling it into a traditional stocks and shares or cash ISA.

Awareness has shot up according to a survey conducted by Orbis Investments, in an almost a complete reversal of 2020’s findings when only 38% of 16-17 year-olds surveyed knew about the money and 62% did not.

 

  Turned 18 from Sept 2020-21 Turn 18 from Sept 2021-22
Did know about CTF/JISA money 38% 59%
Did not know about CTF/JISA money 62% 41%

 

This year’s survey shows that of the 16 and 17 year-olds waiting to receive the money on their 18th birthday, 36% were still unsure of what to do with it. Nearly a third (28%) said that they planned to save the cash, but not in an ISA, while 17% said that they would continue to save in an ISA, (split evenly between those who favoured a stocks & shares ISA and those who were opting for a cash ISA).

Less than 13% were looking to spend it.

A year on since the first ever CTF recipients started turning 18, payment to the first cohort of beneficiaries is all but complete.

A survey was conducted that asked a snapshot sample of 18-year olds what they had done with the money they received in the last year.

The spread of findings – recipients were allowed to select more than one option – showed that the most popular option (44%) was to put money into a Cash ISA.

Over one-fifth respectively said they had invested into stocks and shares (21%) or bought cryptocurrencies (21%).

Others are putting it towards a mortgage deposit (18%) and a significant proportion have bought gifts for friends and families (26%).

Nearly a third of donated some money to charity (29%).

“With global equities outperforming cash over the long-term, and with today’s combination of low interest rates and inflation, the 44% of young recipients who opted to put their money in to a cash ISA might want to think about making their money work harder for them by  investing in stocks and shares.”

Since CTFs launched in 2002, the MSCI World Index has returned 9.9% per annum whereas cash has returned just 1.8%.

“Given the long timeframes involved, we would also encourage parents who are still putting money away for their children to seriously consider the benefits of stocks and shares over cash. History shows the awesome power of compounding over long periods of time: £100 saved in cash when CTFs were launched would today be worth £141.  That same £100 invested in global stock markets would be worth £593, over four times more.  

Whilst the survey indictated  that awareness of CTF entitlement seems to have risen over the last year, there is still a long way to go – 41% are still unaware of the lump sum amount they will receive!

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