PARENTS could give their children a £37,000 windfall at 18 by making the maximum top-up to their child trust fund (CTF), although advisers warn that they will end up with much less if they choose a poor account.

All children born since September 1, 2002, have received vouchers worth at least £250 from the government to be invested in a CTF. Parents can add up to £1,200 each year on top.

With another £250 from the government at age seven, by 18, total contributions to the scheme can top £20,000. As long as the fund grows by an average 7% a year that will grow to £37,100 when the child accesses the cash at 18, according to the Social Issues Research Centre (SIRC).

Although few parents are topping up to the maximum, many are ploughing some extra money into their children’s accounts. The average top-up by parents is £21.43 per month, according to the Tax Incentivised Savings Association (TISA) – about a quarter of the maximum allowed.

Stuart Glendinning at comparison firm Moneysupermarket said: “Family top ups can really make the difference in creating a substantial savings pot.”

However, you must choose your fund with care as returns vary widely.

There are three types of CTF. They work just like savings accounts, only the interest is tax-free.

Stakeholder plans are invested in the early years and gradually moved into lower-risk investments such as bonds and cash between the ages of 13 and 18. The charges are capped at 1.5%.

Or you can choose a nonstakeholder fund which are standard unit or investment trusts. Initial charges range from 3.25% to 5.25%. Because it is an 18-year investment, advisers believe taking a risk by investing in shares should pay off, although the riskiest schemes are too racy for most.

The best equity CTF has been the F&C Private Equity fund according to AWD Chase de Vere, an adviser. It has soared 182% since April 2005, by investing in firms not listed on a stock exchange.

Anna Bowes at AWD Chase de Vere said: “It is important not to pick a scheme just because it has performed well recently. A better bet is an investment in Invesco Perpetual Income through the Children’s Mutual scheme.”

She also likes F&C’s plan which can be used to invest in a range of investments trusts.

One of the best CTF accounts is being offered by Hanley Economic Building Society which pays 8% interest.

Kevin Mountford of Moneysupermarket, said there are some alternatives to CTFs.

“Though you benefit from the £500 government lump sum with a CTF, there are plenty of savings accounts which pay a better rate,” he said.

He recommends the Halifax regular saver children’s account which pays 10%. This also allows for a maximum deposit of £100 a month.

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