LONDON (Reuters) - A quarter of children have no basic savings account and many more have no savings role model as parents now borrow and spend, not scrimp and save, Nationwide Building Society said in a report.
Those most likely to lose out were children of single parents. Two-thirds of lone parents had no savings of their own, little disposable income and little ability to put much aside for their offspring, exacerbating the financial divide.
Nationwide told Reuters on Thursday the government's newly introduced Child Trust Fund (CTF) had been a welcome step in addressing this financial divide but there were still 10 million children in Britain who were too old for a CTF and too young for an ISA savings account.
The CTF is a savings and investment account for children under which those born on or after 1 September 2002 receive a £250 voucher from the government to start them off.
Parents, family or friends pay in up to a maximum of £1,200 a year until the child reaches the age of 18, with no tax payable on income and gains in the account.
"The government's introduction of the Child Trust Fund should go some way towards demonstrating to today's toddlers and their parents the benefits of saving but a much broader approach is needed to get the message home," said Nationwide executive director, Stuart Bernau.
Nationwide has drawn up a six-point Children's Savings Action Plan, which will be presented alongside the report to members of Parliament and the Treasury in the New Year. It says government contributions to CTFs should be index-linked.
The government should also, it says, set a target for the number of CTF vouchers it aims to be invested by parents within three months of their receipt.
The Treasury Minister responsible for Child Trust Funds, Ivan Lewis, faced questions on the success of the CTF scheme from the Treasury Select Committee last week.
He said there were currently no plans to extend the CTFs to older siblings of eligible children and no plans to index-link the government contribution.
Nationwide spokeswoman Sarah Atkinson said the government could help the parents of children too old for a CTF but too young for an ISA by allowing them to save for their children without being taxed on any interest earned over 100 pounds.
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