The National Audit Office (NAO) raised concerns that accounts are at risk of becoming forgotten or lost track of by those holding them.
It said estimates indicate that more than one-quarter of CTFs have remained untouched for a year or more after their owners turned 18.
A CTF is a long-term tax-free savings account for children born between September 1 2002 and January 2 2011, which they can access when they turn 18.
The government paid more than £2 billion into CTFs for 6.3 million children born during this period. Most children received around £250 each from the government at the time their CTF was started, while those from low-income families or in local authority care received an additional £250.
Many CTFs were invested in stocks and shares, with the total market value of CTFs standing at £10.5 billion at April 2021.
Some of this belonged to young people aged 18 and over who had not unlocked their accounts.
By April 2021, around 320,000 CTFs had matured in the seven months since the first CTF account holders reached 18 in September 2020.
Of these, 175,000 (55%) had been claimed by the account holders and the accounts closed, and 145,000 remained unclaimed.
Some £394 million was, by April 2021, yet to be claimed in matured CTFs belonging to young adults who had reached the age of 18, the NAO said.
It is unclear how many children and young adults are either unaware of, or unable to locate, their CTF, the NAO said.
It added that HM Revenue and Customs (HMRC) intends to incorporate CTFs into a communications campaign in 2023.
The NAO estimated that CTF providers – including banks and building societies – could be earning collectively up to £100 million per year through charges on accounts.
Gareth Davies, the head of the NAO said: “At a time of economic hardship for millions of people across the country, it is important the government does enough to make sure young people are aware of, and can access, their child trust funds.”
Public Accounts Committee chair Meg Hillier said people need to be proactively helped to be reunited with their funds, adding that, in a cost-of-living crisis, the money could be “a vital lifeline to young people, particularly those from low-income backgrounds”.
