The �250m being spent yearly on the new scheme would be better spent on limiting class sizes to 20 for five to seven-year-olds, said Mr Kennedy.

Under the trust fund, the Treasury gives each child a minimum of �250 which is invested until they are 18.

It was better to spend the cash on education, Mr Kennedy insisted.

Speaking during a visit to a north London early years centre, Mr Kennedy said "tough choices" were needed when it came to allocating government funds.

What would you have done if you had been handed �500 by the state at the age of 18? Charles Kennedy

"Tough choices mean looking carefully at the money being spent on our children and choosing to spend it more effectively, rather than wasting it.

"As a society, Britain cannot afford to postpone investing in our children. That is why my party is strongly opposed to the Child Trust Fund Scheme launched by the government on Tuesday."

A quarter of a billion pounds would be wasted on the scheme, he predicted.

Mr Kennedy added: "Superficially it may sound attractive but ask yourself what would you have done if you had been handed �500 by the state at the age of 18? Would you consider this to be a good use of taxpayers' money?"

'Hollow gesture'

It would be far more "far-sighted" to spend the money to reduce class sizes, rather than "giving 18-year-olds a bit of cash", he said.

Lib Dem opposition to the scheme is nothing new.

The party's education spokesman Phil Willis has said it is a "hollow gesture" with the cash likely to be swallowed up by university fees.

The Child Trust Fund is part of government plans to encourage savings, especially among lower earners.

Each baby born since September 2002 will get vouchers worth �250, or �500 for those from low income families to invest.