Child Trust Fund image - piggybank in a field

Turning 18? How to find your Child Trust Fund (and what to do with the cash)

Turning 18 after 1 September 2020? There could be a hidden stash of cash waiting for you in a dormant account, known as a Child Trust Fund. Here's everything teens (and their parents) need to know, including how to find lost CTFs, how much they could be worth and how to make the most of the cash.

What is a Child Trust Fund?

Child Trust Funds (CTFs) are tax-free savings accounts that were available for kids born between 1 September 2002 and 2 January 2011. Initially, kids got free cash vouchers of up to £250 (or £500 if their parents were on a low income) from the state to be added to their CTF.

This contribution was scrapped in 2010, with the whole CTF scheme following shortly afterwards, being replaced by junior ISAs in 2011. However, existing CTF accounts continued to operate, hopefully earning interest or investment returns in the meantime.

When a CTF was opened, parents and others could deposit additional savings into it, but any money in there was locked away until the child's 18th birthday. Once the child turns 18, the money's unlocked. And, legally, the cash now belongs to the child – and they can spend it on anything they wish!

In total, about 6.3 million CTFs were opened, and it's estimated that around 55,000 CTF account holders will turn 18 each month and get access to their cash.

How much could my CTF be worth?

It really depends, as the amount contributed by the Government was based on household income, funds could be held as cash or as investments, and parents, friends or relatives could also add to the pot.

But to give you a rough idea of what you can expect, the average balance of a CTF for those born between September 2002 and August 2003 is about £650, according to a recent report from the Institute for Fiscal Studies. The same report found that more than half (55%) of those CTFs have a balance of £500+, and just under a quarter (23%) have £1,001 to £5,000 in them.

How can I find my (or my child's) CTF?

There are an estimated one million lost CTFs, according to charity the Share Foundation. Often this happens when a family moves home and forgets to update their CTF provider with their new address.

But don't worry – whether you've just turned 18 and want to find your own CTF, or you're a parent who wants to find a younger child's CTF, there's a way to track down lost accounts.

HM Revenue & Customs (HMRC) has a handy tool where you can find out which provider your CTF is with. The tool can be used by parents and teens. Here's a step-by-step guide:

  1. Go to HMRC's tool. You'll need to log in using a 'Government Gateway ID'. If you don't have one, it's no biggie – you can create one easily.
  2. Fill in your (or your child's) details, including name, address, date of birth, phone number and national insurance number.
  3. You should hear from HMRC within three weeks telling you which provider holds the account – if it needs further information, it'll contact you by phone or post.
  4. Contact the CTF provider and it can reunite you with the account.

If you're 16 or older, you can do this for yourself (you can find your CTF before 18, you just won't be able to access the cash). If you're a parent with children younger than 16, you can find out where the CTF is held on their behalf. You'll need their unique reference number (check for it on any old paperwork related to CTFs) or their national insurance number – if you don't have these details, you'll need to apply by post.

What should I do with the cash?

The short answer is it's entirely up to you – if you've just turned 18, it's now your money. But this is MoneySavingExpert.com, so we want to help you make the most of your cash. Here's a rundown of your options:

1. Put it towards a first home – and get a massive 25% boost

Owning a home might seem like a distant dream, but this could help. If you've never owned a home before, you can open a top Lifetime ISA. This is a special tax-free savings account which gives you a 25% bonus on up to £4,000 saved a year (so a max £1,000/year bonus). You can then use this towards buying your first home.

Pros:

It's a lot more free money!

Relatively low risk. If you decide not to buy, or end up needing the money for something else, you can always withdraw the money (but see below for the catch).

Cons:

If you later want to use the money for anything other than buying your first home (or retirement), you won't get the 25% bonus and may have to pay a small penalty to withdraw the cash.

2. Move it to a top savings account

If you won't be spending the cash straightaway, but think you might want to in the next few years, don't just leave it in a holding account, which may mean you earn nothing on it. Instead, move it to a top easy-access account so it can continue to grow.

Side note: It's unlikely, as you just turned 18, but if you're quick off the mark (or have left it late to do anything with your CTF) and you have debts, like an overdraft or credit card, it may be worth paying those off instead of saving (see Repay debts or save?).

Pros:

A bit more free money, in the form of interest.

Flexibility. With an easy-access account, you can take the money out whenever you want, as and when your plans change.

Cons:

Not very exciting.

Even the best savings accounts don't pay very much at the moment.

3. Invest it

First things first – investing is fundamentally risky. You're ultimately taking a gamble, as there's no guarantee you'll get all your money back. So while you could get lucky and make a big profit, you could also get unlucky and make a big loss. That said, there are ways to reduce the risk – see our Investing for beginners guide.

Pros:

If you can invest for at least five years (and ideally longer), there's a decent chance of growing your money faster than if you left it sitting in cash, ie, EVEN MORE free money!

Cons:

It's risky. Put bluntly, you could lose everything.

Little flexibility. You can usually cash out investments if you need to, but it's slower than withdrawing from a savings account, you may have to pay fees and it could 'crystallise' a loss.

4. Spend it

So you've just discovered you're RICH (or at least richer than you were a few days ago) – surely there's no better time to splash the cash? We've always said one of the potential pitfalls of CTFs is that you could easily blow the money on a night out or a holiday the moment you turn 18. Definitely tempting, but maybe not the best idea... Instead, why not use it as an opportunity to learn about saving or investing for the future? 

Pros:

It's fun.

Cons:

As above, you'll miss out on future savings or investment growth, which could make you EVEN RICHER.

PS: Before spending, always...

Just choose which option's right for you. But whatever you do, there's one thing you should definitely avoid doing with your CTF cash...

DON'T pay uni tuition fees upfront

If you're planning to go to uni, it's best not to put the CTF cash towards paying your tuition fees, as it could end up being a huge waste of money. This is because many graduates won't come close to repaying the cost of their tuition fees through student loan repayments. For why, see Beware paying tuition fees upfront.

What happens if I do nothing?

If you do nothing, what happens will depend on where your CTF is currently held:

  • If it's in a stocks & shares (investment) CTF, it'll be converted to an adult stocks & shares ISA. The only exception is if your provider isn't authorised to offer ISAs, in which case it'll transfer to an HMRC-protected account, which'll keep the tax-free status of the cash, though won't allow you to make additional contributions.

  • If it's in a cash CTF, it'll be converted to an adult cash ISA. Again, if your provider isn't authorised to offer ISAs, it'll transfer to an HMRC-protected account, which'll keep the tax-free status of the cash but won't let you contribute.

It can be a legitimate choice to leave your CTF where it is, but only if you've determined it's the best place for your money. Check with your provider about the account it'll transfer you in to, what the terms are and how you can access the cash if you decide you want to do that later. There's no time limit to claim your CTF cash.