Borrowing child’s savings...

[Quckname]

Do you think the following is acceptable?

Parent has some expensive debt on credit cards. The interest free period is expiring and the parent is not able to get a loan or balance transfer to a lower rate.

Child has an instant access savings account with some money in.

Is it ok for the parent to borrow funds from the child to repay the expensive debt, as long as they ensure that the savings are repaid (with interest) before the child would have used the account?

So as not to drip feed:

• money in the savings account was paid in by the same parent (not friends & family)
• money would be repaid along with the compound interest that it would have accrued in savings
• repaying to the child’s savings would take approx 3 - 4 years, compared to it taking 20 years plus to repay on the credit cards with high interest
• child is still young so not due to receive the savings for a long time
• the child has not been asked for their opinion because they are too young (and too generous) to make an informed decision
• parent has explored and exhausted all other options to reduce the cost of borrowing
• if paid off, the credit accounts will be shut down so that it is not possible to accrue large debt again

What do you think?

YABU - borrowing the money is the same as stealing, the parent shouldn’t touch the child’s savings and should repay their debt over the longer period of time at the high interest rate.

YANBU - the money will be repaid to the child’s savings, and the child will benefit from having a parent that is not stuck in long term expensive debt

Tell that to dwp then @Slippy78 because if op ever had to make a claim for benefits, she would be expected to use their child's accessable savings first.

How much money is it?

This is pertinent.

I never said you're contributing to anything, you're certainly not making me feel inadequate. I also accept you can have an opinion, doesn't mean I can't think it's judgemental and unhelpful. Not sure what various personal issues you think I have, but nice assumptions - again.

@MillicentBystander101

Tell that to dwp then *@Slippy78* because if op ever had to make a claim for benefits, she would be expected to use their child's accessable savings first.

But the savings aren't accessible. Legally the bank has to refuse the funds being withdrawn.

Savings you have made on your child's behalf are still your savings until you gift them to your child. It's not sensible to have savings, other than a small emergency fund, at the same time as having debt.

@MillicentBystander101 I think you are internalising a bit and it’s making you take out your own feelings of being judged out on posters. You may disagree but it’s very reasonable to discuss the fact the money may not be repaid. Nobody knows anything else about OP or their personal life so they are not judging them simply drawling from their own experience of similar situation.

I was caught out by one particular lender slashing a large credit rating, meaning that I no longer had the flexibility to swap between interest free periods

You have tried other lenders, haven't you?
Not just the one(s) you are already with?

@Slippy78 the savings don’t earn anywhere near enough money to be eligible for tax, no matter if they’re considered mine or DC’s so tax evasion doesn’t come into it.

That's my point, though @ithinkilikeit No one knows and can only go on the information given. OP has said she was young and feckless with money, that she is now more mature and responsible. She will be able to return the money and her finances are a lot more stable. So why not discuss the situation based on that, instead of saying she probably won't give it back and she's a thief? Or in your words, internalising and taking out their own feelings of how they were not repaid
when it happened to them.

@MillicentBystander101

I never said you're contributing to anything, you're certainly not making me feel inadequate. I also accept you can have an opinion, doesn't mean I can't think it's judgemental and unhelpful. Not sure what various personal issues you think I have, but nice assumptions - again.

Not an assumption; based on your completely unsolicited diatribe . You really need to let this go now, you're being completely weird.

@GrandmaSteglitszch yes I have looked at other lenders. I am still considered credit-worthy enough to get credit, but only expensive credit. No one is trying to entice me in with cheap deals anymore.

A hard no Bluntness ?

That's quite thoughtless of you. All the whatifs that come into play, loss of home, lack of day to day items, etc, and you give a hard no

That's not blunt, it's uniformed, comes from a place that lacks empathy or understanding. But good for you...

I'm getting confused here.

Will the child savings completely clear the debt? Why would the debt take 20 years to pay off without using the savings?

If the savings will clear the debt, why will it only take 3-4 years to replace the savings, yet 20 years if you don't use the savings. Surely realistically the cards can be paid off in 3-5 years (why not approach the lenders, freeze the account and make a manageable payment offer)

I would, and wouldn't even think twice about it , have any doubts or asking anyone else.

It's needed now, and your kid will benefit from you being debt free as well. Do try as much as possible to replenish their savings though.

Seems the best option to me, do your best to pay as much as possible back but sounds like without using it then family life is going to be affected for potentially the rest of the DC's childhood. It's a no brainier really. Can't believe pp's calling it them from when it's from the parent to their own child in the first place.

As the parent who provides for the child you need to be in a good financial position in order to feed clothe and keep a roof over your child’s head, this is all part of parenting. I am also of the belief that child benefit should also go to general housing costs too if needed as this will directly effect them.

But the savings aren't accessible. Legally the bank has to refuse the funds being withdrawn.

Some children’s savings accounts are accessible by the parent account holder so the banks can’t refuse. DWP include any savings in these types of accounts as capital in their assessments and would expect you to spend that money before giving you UC. This is why I specifically set up a Junior ISA for my DS (and avoided other types) as it’s not accessible and not included in UC assessments.

Given OP is considering using these savings, it’s safe to assume she knows the account terms and it’s an accessible account.

Why should OP struggle or compound their debt with more interest when they have the means to pay it off.

DD is 8 months old and I have an account in my name in which I save with the intention of giving to her when she goes to uni.

If I should need the money between now and then should I suffer because it's "hers" even though she is a baby and has no knowledge of it. Would I be a thief?

Some of the reactions on here are insane - unless OP is using money gifted by family and friends to pay off her debt then I don't see any harm.

@HalzTangz

Yes, the DC has more in savings than the value of the debt, so would still have some money if I did borrow. (I would need to borrow about two thirds of their savings pot).

These aren’t the exact numbers (not comfortable sharing precise numbers, but I do know them) but to give a rough idea....

Borrowing £4000 from DC and repaying at £100 per month would take 40 months, plus a few extra months of paying to make up for compound interest lost.
£4000 on the credit card, repaying £100 per month, but with £80 being interest, would take 200 months (and obviously cost much more in the long run).

@HalzTangz

I'm getting confused here.

Will the child savings completely clear the debt? Why would the debt take 20 years to pay off without using the savings?

If the savings will clear the debt, why will it only take 3-4 years to replace the savings, yet 20 years if you don't use the savings. Surely realistically the cards can be paid off in 3-5 years (why not approach the lenders, freeze the account and make a manageable payment offer)

Interest on these accounts can be huge when the free period runs out. A 15k debt can quickly become close to 30. Asking to freeze or change payments just prolongs and also affects credit ratings

I would absolutely use the money to pay off the debt.

So if the current situation was that I was saving £25 per month for my child and repaying £100 per month on the credit card, once the credit card was paid off, I would:
Save £75 month for my child and £150 for my own savings.

Debt like this is stressful and consumes your thoughts. You might find that you have more energy and could work an extra couple of hours a week or take a look at the £10 per day threads here. Build yourself some contingency.

And I'd do this FREE course from Martin Lewis and the Open University
here.

OK @GreyhoundG1rl Although, you've been quite personal and actually not a very nice person as well as judgy and condescending. I'll keep my issues over yours, thanks.

Anyway, sorry for derailing OP.