Investment options always look rosier when you have time on your side but thankfully most children are too busy living in the present to worry about financing the future.

However, parents, grandparents and other members of the family can use a child's time advantage to help them when they grow up. Education is the priority for many parents and, despite the abolition of third-level fees, it can still cost thousands to support a young adult through college.

Building up a fund to be gifted to a young person at a future date is a fool-proof way of saving or investing because you retain control of your money and react to changes in circumstances over time.

Realistically, it doesn't make sense to give money to your children until you have looked after yourself. There are different financial demands at different stages of life and, in 10 years, you may need that lump sum more than your 21-yearold. In a more prosperous society, many people look upon Children's Allowance as a bonus rather than an essential element of the family budget. In June, one month after the Government savings scheme begins, the monthly child benefit payment will rise to £67.50 (#86) for the first and second child, and £86 for third and subsequent children. Families who can afford it can divert the monthly payment into a savings scheme account, with a view to keeping up the payments for the long term.

Take for example a two-year-old child who is likely to remain in full-time education until 17 years. By investing that child's £67.50 for the next 15 years in a deposit account beginning as a Government-sponsored savings account, you could build up a fund of more than £17,000. That's without factoring in any increases in the benefit over time.

Putting the same amount into a middle-of-the-road equity-based product could generate a fund of more than £21,000.

Those figures are based on certain assumptions regarding inflation, the rate of return and contributions. Working out these projections is a bit tricky because family finances can go through rocky patches and you never know if you will be able to see an investment through to the end of the term.

Even so, it's to the whole family's benefit for parents to have savings put by and it may help increase the opportunities open to the children when they are pursuing their goals. Keeping the arrangement open is one way to give yourself the freedom to choose when the time comes. You can plan an investment for the benefit of a child but keep it as your asset, remembering to document your intention in your will.

It becomes more complicated if the asset, such as shares or property, is in the child's name. Any income produced by an asset purchased by parents for a child under 18 is treated as the parents' income for tax purposes. If the income comes from an asset purchased by another person connected to the family, the income is deemed to be the child's.

Parents may have to fill out a tax return in this scenario if the income is above tax-liability thresholds or if there is Dividend Withholding Tax to be reclaimed.

There is also the option of setting up a trust on behalf of the child to hold the assets, but this is quite expensive and calls for professional advice. Generally speaking, it's really only worth looking into if there is a substantial amount of money involved or if the child will need life-long assistance.

The tax-free threshold for Gift or Inheritance Tax is £316,800 overall from a parent or grandparent to a child. There is a lower threshold of £31,680 for gifts or inheritance from other family members. Children can also receive £1,000 each year tax free from their parents or other benefactors.