With the fourth anniversary of the Child Trust Fund (CTF) on Monday, experts are urging parents to ignore bad news about savings and consider setting aside a nest egg for their children to secure the next generation's financial future.

The Government's CTF initiative offers any child eligible for child benefit and born after September 1, 2002, a savings voucher worth a minimum of £250, with an additional £250 contribution when the child turns 7. You can then choose to deposit the money in a CTF account, where it can be topped up by friends and family of the child by up to £1,200 a year.

There are three types of CTF account. Investment and stakeholder CTFs put the money in stocks and shares, while ordinary savings accounts are for cash deposits. All CTF savings are tax-free and cannot be accessed until the child is 18, at which point the fund is his or hers to keep.

There has been a slight decline in the number of people choosing to put their child's £250 allowance into a specific CTF account in the past year, according to figures from Revenue & Customs. But from April 6 the application process is to be simplified to encourage more active engagement from parents.

In previous years, CTF providers would need to receive the government voucher before an account could be opened. This year you can open a CTF online or by telephone without posting the voucher. If parents have not chosen an account within a year of the child's birth, the Government will deposit the money in a stakeholder CTF automatically.

Andrew Hagger, of moneynet.co.uk, the financial website, believes that it is essential to keep saving for children, even during a recession. He says: “The UK population needs to become more savings-focused and move away from the buy-now-pay-later culture that has been so prevalent for the past decade. It is never too early to start saving, and it doesn't make sense to wait until your children are out at work, and saving their own money.”

Kate Baker, head of savings at Family Investments, the CTF provider, agrees. “Child Trust Funds can have a real and positive impact on social mobility,” she says, “but only if parents are encouraged to engage with the scheme from the birth of their children.”

If a family contributed £100 a month to a CTF cash savings account for 18 years, the child could receive as much as £37,000.

Although rates on CTF accounts have taken a battering after multiple cuts to the Bank of England base rate, the best-buy cash accounts still offer returns that compare favourably with adult offerings. Hanley Economic Building Society has a CTF that pays 5 per cent on a minimum opening balance of £250. You can make further deposits, starting with as little as £1, but remember that all CTFs limit contributions to a maximum of £1,200 a year.

The Skipton Building Society Cash Savings Child Trust Fund has a rate of 3.05 per cent and allows additional payments from £10, while Yorkshire Building Society's Cash Savings CTF Account pays 3 per cent with no lower limit on additional contributions.

If you wish to deposit more than £1,200 a year or need access to your child's savings before he or she turns 18, consider opening a regular savings account tailored to young people.

The Halifax Children's Regular Saver pays 8 per cent, fixed for one year, on monthly deposits of between £10 and £100. If you miss a payment or make a withdrawal before the year is up, the account will be closed. After 12 months all the money is transferred to a Halifax Save4it account, which currently pays 1.55 per cent. Any adult can open up to five Halifax accounts in trust per child under 16.

The Nottingham Building Society Children's Regular Saver Issue 8 offers a one-year fix at 5 per cent, also with a minimum monthly deposit of £10 and a maximum of £100.

The Savings Bond from Clydesdale Bank is fixed at 3.25 per cent for five years on balances of more than £50, with a maximum deposit of £250,000.

The best instant-access children's account is with Earl Shilton Building Society. Its Foundation Account pays 2.25 per cent on balances between £250 and £10,000.

Cash in with KidStart

Fancy turning your weekly grocery shop into a way of making money for your child? Then make sure that you sign up to KidStart. Backed by the Financial Services Authority, KidStart is a savings club that boosts your child's savings every time you shop online.

When you make a purchase from one of the 200 retailers in the scheme, up to 20 per cent of the value of your transaction will be deposited in your child's desiginated savings account or Child Trust Fund. For example, Marks & Spencer donates 4 per cent of the cost of your purchases, so £100 spent online will add £4 to your child's savings. John Lewis, meanwhile, donates 5 per cent each time you shop on its website.

Other scheme members include Mothercare, Boots, Thomas Cook and Ocado. For more information and to register free, go to kidstart.co.uk.