Are you passing up on free money?

 

I often wonder how people just forget about money they are owed, money they worked hard for and just left dormant in an account, until they forgot about said account. Being a young adult, I haven’t had so many accounts in my life. A few ISAs, savings accounts, current accounts, at the moment everything is spread across three banks. I imagine as you get older, your company may have asked you to open an account to put your pension in, after 6 months you got a new job offer, forgot about the account and never claimed the tiny pension you are owed on that account 30 years later. There are even companies that help you find any money in your name you might have forgotten about!

That is what happened to about a fourth of the Child Trust Funds, belonging to children born between 2002 and 2011. Their parents often left it up to the government to appoint a provider to hold the Child Trust Fund, and forgot about it. Those accounts, also categorized as “zombie” have never had any additional fund added to the government’s contribution since the child was born, as ISA provider Scottish Friendly reports. I can understand that the birth of a child is a pretty stressful moment, and you may have forgotten that the government gave you free money to help your kid get a jump start in life, but now is not too late to claim the money back. You can even transfer it to a Junior Individual Savings Account (JISA), today’s equivalent of the Child Trust Fund. Or you can keep adding up to £4,000 a year into your kid’s Child Trust Fund and benefit from tax free savings on that amount.

While the child is young, this is a great way to save without paying tax on the interest, if you have already maxed out your own ISA. As the child grows older, you can teach them good savings habit by deciding together which part of his money from birthday or Christmas gifts, or a part time job as a teenager should go into savings.

If you leave your Child Trust Fund dormant, you are not only passing up on free money, you are missing an opportunity to help your child become a financially responsible adult who knows that money is to be earned and saved so you can afford the lifestyle you want as an adult.

Your child can take control of the Child Trust Fund or Junior ISA when he reaches age 16, but can’t withdraw money until age 18. With a Junior ISA, you can choose between a cash JISA or a stock and shares JISA where you won’t pay tax on capital growth or dividends received. Just remember to claim it when your child turns 18! Chances are if you forgot about it for several years you might be impressed by how much the amount has grown.

 

 

This post was written in collaboration with Scottish Friendly. You can follow them @scotfriendly.