Almost 430,000 young people between the age of 18 to 21 have yet to claim an average £2,000 in funding, HMRC have warned.
The Child Trust Fund, which was introduced by New Labour in 2002, granted every child a long-term tax-free savings account.
The accounts were set up for every child born after September 1, 2002, with the government contributing an initial deposit of at least £250.
Funds can be withdrawn once the account matures when the child turns 18.
The scheme was closed by the coalition government in January 2, 2011, and a recent student survey, conducted by UCAS, revealed approximately 430,000 people between 18 to 21-years-old have unclaimed funds in their account.
The survey asked first and second year university students about Child Trust Funds with 43% saying they would be interested to know how much money is in their account.
While the UCAS survey revealed that 74% of respondents were aware of Child Trust Funds, 60% said information about the funds had come from their parents.
As part of UK Savings Week, which runs from September 18 to 24, HM Revenue and Customs (HMRC) are urging all those eligible to check if they have unclaimed funds.
There are currently 5.3 million open Child Trust Fund accounts.
Young people aged 16 or over can take control of their own account, although the funds can only be withdrawn once they turn 18.
More than 500,000 matured Child Trust Fund accounts have been claimed or transferred into an ISA since the oldest children on the scheme turned 18 in September 2020.
Families can continue to pay in up to £9,000 a year tax-free into a Child Trust Fund until the account matures. The money stays in the account until the child withdraws or reinvests it into another account.
Further findings revealed 75% of men were aware of Child Trust Funds compared to 73% of women.
Of the people who had not yet claimed their Child Trust Fund, 76% of respondents were likely to take steps to learn more about how to withdraw it.
Angela MacDonald, HMRC’s second permanent secretary and deputy chief executive, said: “Many 18-21 year olds are starting out in first jobs or apprenticeships, starting university or moving into their first home and their Child Trust Fund is a pot of money with their name on.
“I would encourage young people to use the online tool to track it down or, for parents of teenagers, to speak to them to ensure they’re aware of their Child Trust Fund. It could make a real difference to their future plans.”
Sharon Davies, CEO of Young Enterprise said: “We would encourage all young people to investigate if they have money which is unclaimed in a Child Trust Fund and to use it wisely.
“A disproportionate amount of the money is unclaimed by young people from disadvantaged backgrounds who are the very people who would benefit most from these funds. The investment could be placed into an adult ISA or put towards driving lessons, education or starting a business.
“The money in a Child Trust Fund has the potential to be life changing and the lack of knowledge about them shows the importance of financial education and financial planning from a young age”.
The government is offering help for households. Check gov.uk to find out what cost of living support you could be eligible for.
Young adults and parents can search on gov.uk to find out where their Child Trust Fund account is held.