Financial matters

Child trust fund saving accounts
The Child Trust Fund (CTF) is a Government backed savings scheme for chldren that came was launched on 6 April 2005, It is designed for all children receiving Child Benefit who were born on or after the 1st of September 2002. Under the child trust initiative, the Government will provide a minimum of £250 in the form of a voucher (low income families could recieve much more, low income figures for 2007/08 was decided as under£14,495 for household income ), accepted by the Child Trust Fund providers, to open a tax-free Child trust fund saving account on behalf of the child. A further payment of £250 is paid into their Child Trust Fund at age 7 from the Government. Additional funds can be paid into the account up to a maximum limit of £1,200 a year.

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Child trust fund savings accounts
With a Child trust fund savings account any money you invest is completely secure. For example if you invest £300, your child will get that original sum of money back as well as some interest on that original sum. Dont confuse childrens savings with other types of investment or savings such as stocks and shares, bonds, trusts and equities, the money invested in child trusts are totally secure and guaranteed.

Child trust fund savings account
The theory behind the child trust fund is to ensure your child has savings at the age of 18 and to help and encourage the child to get into the habit of saving and appreciate the benefits of saving and personal finance. whether this will prove to be the case is unsure, however it is a straighforward way to invest money in a rock solid account for the benefit of your child(ren). Most accounts will accept manual payments from as little as £5 and monthly direct debits of £10 or more to make saving easier.

Child trust funds savings providers
There are over 70 different CTF providers and distributors in the UK. These include banks, friendly societies and fund managers. One such company, Family investments, is a leading CTF provider with over 400,000 accounts on the books, they also look after all the child trust accounts for Barclays Bank, the Post Office and Sainsbury’s Bank. There are even specialised accounts taking peoples religious and ethical beliefs on board such as Shariah compliant Child Trust Fund accounts that fully respect Islamic law in regard to islamic savings and investments.

No wonder many parents are using a savings child trust fund to maximise the financial provisions for their childrens futures. For more on the tax benefits of child trust fun savings accounts see HM revenue’s CTF page. For further details about these schemes ccheck out the government child trust savings fund page at Direct.gov.uk savings and investments

Investing in bonds is very safe, and the returns are usually very good. There are four basic types of bonds available and they are sold through the Government, through corporations, state and local governments, and foreign governments.

The greatest thing about bonds is that you will get your initial investment back. This makes bonds the perfect investment vehicle for those who are new to investing, or for those who have a low risk tolerance.

The United States Government sells Treasury Bonds through the Treasury Department. You can purchase Treasury Bonds with maturity dates ranging from three months to thirty years.

Treasury bonds include Treasury Notes (T-Notes), Treasury Bills (T-Bills), and Treasury Bonds. All Treasury bonds are backed by the United States Government, and tax is only charged on the interest that the bonds earn.

Corporate bonds are sold through public securities markets. A corporate bond is essentially a company selling its debt. Corporate bonds usually have high interest rates, but they are a bit risky. If the company goes belly-up, the bond is worthless.

State and local Governments also sell bonds. Unlike bonds issued by the federal government, these bonds usually have higher interest rates. This is because State and Local Governments can indeed go bankrupt ñ unlike the federal government.

State and Local Government bonds are free from income taxes ñ even on the interest. State and local taxes may also be waived. Tax-free Municipal Bonds are common State and Local Government Bonds.

Purchasing foreign bonds is actually very difficult, and is often done as part of a mutual fund. It is often very risky to invest in foreign countries. The safest type of bond to buy is one that is issued by the US Government.

The interest may be a bit lower, but again, there is little or no risk involved. For best results, when a bond reaches maturity, reinvest it into another bond.

There are several different types of investments, and there are many factors in determining where you should invest your funds.

Of course, determining where you will invest begins with researching the various available types of investments, determining your risk tolerance, and determining your investment style ñ along with your financial goals.

If you were going to purchase a new car, you would do quite a bit of research before making a final decision and a purchase. You would never consider purchasing a car that you had not fully looked over and taken for a test drive. Investing works much the same way.

You will of course learn as much about the investment as possible, and you would want to see how past investors have done as well. It’s common sense!

Learning about the stock market and investments takes a lot of time, but it is time well spent. There are numerous books and websites on the topic, and you can even take college level courses on the topic which is what stock brokers do. With access to the Internet, you can actually play the stock market  with fake money to get a feel for how it works.

You can make pretend investments, and see how they do. Do a search with any search engine for Stock Market Games or Stock Market Simulations. This is a great way to start learning about investing in the stock market.

Other types of investments outside of the stock market do not have simulators. You must learn about those types of investments the hard way or by reading.
As a potential investor, you should read anything you can get your hands on about investing but start with the beginning investment books and websites first. Otherwise, you will quickly find that you are lost.

Finally, speak with a financial planner. Tell them your goals, and ask them for their suggestions - this is what they do! A good financial planner can easily help you determine where to invest your funds, and help you set up a plan to reach all of your financial goals. Many will even teach you about investing along the way but make sure you pay attention to what they are telling you!

Each individual has a risk tolerance that should not be ignored. Any good stock broker or financial planner knows this, and they should make the effort to help you determine what your risk tolerance is. Then, they should work with you to find investments that do not exceed your risk tolerance.

Determining oneís risk tolerance involves several different things. First, you need to know how much money you have to invest, and what your investment and financial goals are.

For instance, if you plan to retire in ten years, and you’ve not saved a single penny towards that end, you need to have a high risk tolerance  because you will need to do some aggressive and risky investing in order to reach your financial goal.

On the other side of the coin, if you are in your early twenties and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly over time.

Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance really has no bearing on how you feel about risk. Again, there is a lot in determining your tolerance.

For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do?

Would you sell out or would you let your money ride? If you have a low tolerance for risk, you would want to sell out if you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!

Again, a good financial planner or stock broker should help you determine the level of risk that you are comfortable with, and help you choose your investments accordingly.

Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together.

Depending on the type of investing that you plan to do, you may need to hire a broker to handle your investments for you. Brokers work for brokerage houses and have the ability to buy and sell stock on the stock exchange. You may wonder if you really need a broker. The answer is yes. If you intend to buy or sell stocks on the stock exchange, you must have a broker.

Stockbrokers are required to pass two different tests in order to obtain their license. These tests are very difficult, and most brokers have a background in business or finance, with a Bachelors or Masters Degree.

It is very important to understand the difference between a broker and a stock market analyst. An analyst literally analyzes the stock market, and predicts what it will or will not do, or how specific stocks will perform. A stock broker is only there to follow your instructions to either buy or sell stockÖ not to analyze stocks.

Brokers earn their money from commissions on sales in most cases. When you instruct your broker to buy or sell a stock, they earn a set percentage of the transaction. Many brokers charge a flat ëper transactioní fee.

There are two types of brokers: Full service brokers and discount brokers. Full service brokers can usually offer more types of investments, may provide you with investment advice, and is usually paid in commissions.

Discount brokers typically do not offer any advice and do no research ñ they just do as you ask them to do, without all of the bells and whistles.

So, the biggest decision you must make when it come to brokers is whether you want a full service broker or a discount broker.

If you are new to investing, you may need to go with a full service broker to ensure that you are making wise investments. They can offer you the skill that you lack at this point. However, if you are already knowledgeable about the stock market, all you really need is a discount broker to make your trades for you.