Sow the seeds for your child’s future financial security now

The son of one our family friends developed a range of computer software packages as part of his A level course. When he left school he turned it into a business rather than attending university and now, at the age of 23, he has sold the company for £80 million. Life for mum is now a series of unexpected Sunday lunches in France , by helicopter naturally, and Harrods shopping trips.

Never mind Harrods, I hear you say, what can I do to make sure my child is as financially independent when he or she reaches adulthood? Well it's my belief that financial management skills should be given the same emphasis as the other disciplines we nurture in our children as they progress towards maturity. I am obviously not alone in thinking this as the government is launching a number of initiatives, some aimed specifically at children, to improve the nation's financial acumen, and the Financial Services Authority has been given a budget of £50 million a year to help them achieve this goal.

But where should I start?

Well why not at the very beginning? The government provides parents with a voucher worth £250 on the birth of every child - £500 for families on low incomes - to invest in a Child Trust Fund (CTF), and a further £250 on the child's seventh birthday. Family and friends can add £1200 a year to top up the fund. I think this product should be the bedrock of children's financial education going forward. By involving children in the process of actively managing their CTFs from an early age they can develop many basic financial skills along the way, and ultimately reap the benefits of their actions when they reach the age of 18 and finally gain access the accrued funds!

And here's how

•  When they receive gifts of cash help your children decide how much should go into their CTF, remembering the money is locked in until they are 18, earning tax free interest

•  Together review the performance of the CTF every year and compare it with other providers, and swap to another fund if you think it appropriate. Set an annual goal for the value of the fund, after all what gets measured gets done

•  Help them to understand the difference between cash funds, which work like savings deposit accounts, and those that invest in stocks and shares

•  Set a long term monetary target for the fund, and as your child grows up start focussing on what they would like to use money for when they reach 18

•  Incorporate another financial product into your child's portfolio to take advantage of the many children's savings accounts available from banks and building societies. These offer a range of premium rates or free gifts and goodies to encourage juniors into the saving habit, whilst giving them access to their cash when they want it

What about older children?

If your child was born before the 1 st September 2002 they will not be eligible for a Child Trust Fund, but much of the good practice above can be put to use with other saving and banking products – just remember to take advantage of any tax-free schemes.

Finally, we all need to acquire the art of successful budgeting if we are to avoid expensive lessons later in life. I am often surprised by adults who have got themselves into financial difficulties which could easily have been avoided with some simple income and expenditure analysis to determine their budget. Encouraging children to understand that Birthdays, Christmas and holidays have to be budgeted for from pocket money is a simple and meaningful way to start. A recent survey found that the average British child, aged between 5 & 16, has a take home pay of £821.35 a year, with additional benefits like tooth fairy income starting at £1.24 a tooth – not a sum to be sneezed at. Like teaching a child to tie his shoelaces, you will have to invest time at the start, but there is the potential there for great long-term benefits, and you could possibly learn something yourself!

Unfortunately much of this advice came to me rather late in life, and I did not apply it to my own children – trust me I am now paying the price! However I am determined to at least play Monopoly with the grandchildren - you never know they may become millionaire property developers and look after their old granddad.



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