The Guardian

Nearly two-thirds of parents would prefer their children to use money from their ‘baby bond’ child trust fund to put towards an education, rather buying a house, the results of a recent poll showed. With £3,000 top-up fees due to be launched next year and fears among student groups that that cap will be raised by the end of the decade, parents are already concerned about how their children will fund their education. The bank Halifax has questioned parents who have recently opened new accounts to invest their child’s trust fund, and found that 61 per cent were hoping their child would spend the money on their education. A further 28 per cent said they thought their child should buy their first car with the cash and just 19 per cent hoped it would provide a big enough chunk of a deposit to buy a house.

Under the government’s scheme, every child born on or after September 1st 2002 is entitled to a child trust fund. Parents receive a voucher from the government when their child is first born. Most receive £250, but children born into low-income families get £500. Parents can invest the money in a child trust fund of their choice, and can choose between a deposit-based account or one that invests in stocks and shares. A further £1,200 a year can be contributed to the account by relatives or friends. The poll showed that 60 per cent of parents planned to make additional contributions to their child’s trust with almost half of those (47 per cent) planning to make monthly contributions. With other family members and friends also able to contribute, 73 per cent of parents said they expected their child’s grandparents to make additional investments.

Although only 8 per cent of parents expect to invest the maximum annual contribution of £1,200 each year, 42 per cent said they will contribute between £100 and £250, and 31 per cent plan to increase their level of investment in subsequent years, the poll showed. The average debt of a graduate currently stands at around £12,000, but that is expected to rise significantly after top-up fees are introduced next year. The government is committed to maintaining the cap of £3,000 until a review of the system in 2009 when it will consider how the process is working and crucially whether any students are being put off going to university

because of cost.