Today I’m sharing some child trust fund mistakes parents make in the UK. If your child was born between September 2002 and January 2011, they’ve got a Child Trust Fund. The government set one up for every eligible child, putting in at least £250, with families on lower incomes receiving up to £500. In the final months of the scheme, contributions were reduced to as little as £50. The problem is, a lot of families have completely forgotten about them.

Frustratingly, my eldest was born a few months after this scheme closed. Sigh. More than 758,000 matured accounts are still sitting unclaimed, and the average balance is around £2,242. That adds up to roughly £1.6 billion in total, according to HM Treasury. That’s real money, and it’s going to waste. Here’s where things tend to go wrong, and what you can do about these child trust fund mistakes.

Losing Track of the Child Trust Fund Account

This is the biggest issue by far. HMRC opened accounts on behalf of around a third of all eligible families who didn’t respond to the original voucher. That means many parents never chose a provider themselves, and they’ve got no paperwork, no login details and no memory of where the money went.

The good news is there’s a free tool on GOV.UK that will trace a Child Trust Fund for you. If you’re searching as a parent, you’ll need your child’s full name, date of birth and address. If your child is 16 or over, they can search themselves using their National Insurance number. Either way, you’ll need a Government Gateway account. It takes about five minutes, and HMRC will get back to you within three weeks with the provider’s details. They won’t tell you the balance though, so you’ll need to contact the provider directly for that.

Don’t pay a third party to do this for you. Some companies charge hundreds of pounds or take a percentage of the balance for a service that’s completely free through HMRC.

Not Talking About the Child Trust Funds Before It Lands

When your child turns 18, that money is legally theirs. You won’t have any say in how they spend it. Your child can actually take control of the account from age 16, choosing how it’s invested, but they won’t be able to withdraw anything until they turn 18. For some young people, suddenly having access to a couple of thousand pounds can lead to impulsive spending, especially if nobody has ever discussed it with them.

The best thing you can do is have that conversation early. Talk about what the money is, where it came from and what the options are. That doesn’t mean lecturing them. It means giving them the information they need to make a good decision.

What Are the Child Trust Fund Options at 18?

Once a Child Trust Fund matures, there are a few routes your child can take:

• Cash it out and use it for something specific, like driving lessons, a laptop for uni or a deposit on a rental.
• Transfer it into a cash ISA or stocks and shares ISA to keep the money tax-free and let it grow. This won’t count towards their annual £20,000 ISA allowance. If they transfer into a Lifetime ISA instead, it will count towards that account’s £4,000 limit.
• Leave it where it is. The fund will move into a protected account and will keep earning interest or investment returns until it’s claimed.

For larger sums, it might make sense to talk to a financial adviser. A reputable firm like Rathbones can help families think through wealth management decisions, especially if the goal is long-term growth rather than spending the money straight away.

Assuming the Balance Is Too Small to Bother With

Plenty of parents assume the fund only has the original government contribution in it. But even without extra top-ups, investment growth over 16-plus years can push that figure well above £1,000. Families who topped up regularly could be looking at £5,000 or more.

Even a smaller balance is still tax-free money. Transferred into the right ISA, it could form the start of a genuine savings habit for your teenager.

Final Thoughts on Child Trust Fund Mistakes Parents Make

Child Trust Funds were set up with good intentions, but a lack of communication has left over £1.6 billion sitting in accounts that nobody’s claiming. If your child is approaching 18, or they’ve already passed that milestone, now is the time to track down their fund and have a proper conversation about what to do with it. A bit of planning now could give them a much better start.

Important note: The value of investments and the income from them can fluctuate, meaning you could get back less than you put in. Past performance shouldn’t be taken as a predictor of what’s to come.