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

Is the account in the child's name? If so I am not sure it would be that easy to get your hands on it anyway.

I think this is wrong. DH told me that his parents cleared out his sister's savings one summer when they returned from holiday as they had no money left. They didn't repay it.

Find another way to repay the debt. You can stop saving for your child and use that money to put towards it, for example.

Yes definitely borrow the money. Regardless of whether you can repay it. You saved it for the child in the first place.

Financially speaking it is nonsensical to incur interest charges when you can avoid them. And your credit card interest paid would be far higher than the interest your child would get on that account.

This is why I always think it's a bit bonkers when parents save money "for" their children - they have no idea whether their financial situation is going to change and they might need that money in order to actually benefit their children! That's why we've always just had savings in our name and will give it for university/house deposits etc when they actually need it.

Op yanbu and it's not stealing.

I did it. We were in financial dire straits and my child was about 7 years old. Fast forward to their teens and we have repaid and added more.

Had we not have used that money we would not have been able to overcome the situation at the time and it would’ve been detrimental to my child. My child has never been aware of us using that money but certainly would’ve been aware of the dire situation if we hadn’t have used it.

Just do it OP and don’t ask for others opinions. Just work towards making it tight. It’s far better for a child to have a parent out of debt

We have no idea the circumstances in which the debt has been accured, it may have been feckless shoe shopping or it may have been the only way to pay bills / survive. The savings may have been built up before the debt occurred.

However there has been and will continue to be an element of "robbing Peter to pay Paul" and that indicates a potentially massive money issue.

OP as I said previously please seek advice from a Debt Advice Service before making any further decisions, this plan may well not be the best one.

If you saved it, It's all your money anyway.

People get v precious about this sort of on here but back in the real world the interest is going to cost. By using this money you'll be saving yourself a huge amount of interest which benefits your family and child.

I would use it in a heartbeat

Not ideal, but I don't see it being a problem in the long term, providing the money is paid back.

The only issue is why the debt was accrued in the first place as the first place. If for example, the parent lost their job in the pandemic and was otherwise managing financially, then the likelihood is that the money will be repaid. If the debt was accrued due to general living expenses, then I wouldn't be convinced that the money will be repaid, even with the best intentions.

@girlmom21

I wouldn't do it. You've proved you struggle to pay back 'borrowed' money with interest so there's a high likelihood that you'll have the same struggles with this money.

Debt is much more expensive to service than any interest which would be accrued.

It's nonsensical to have expensive debt when you have savings which, in this market, will be almost static. Your debt will grow at a much faster rate than your savings ever will.

Best to get rid of the debt ASAP, by avoiding interest payments it will save money in the long run.

@Cocomarine

20 years vs 3-4 years doesn’t sound right.

Example: Debt is £10K, savings are £10K.

You say 3-4 years (there’s a huge difference between 3 and 4!) to repay the £10K savings.
So - 48 months, £208 a month would rebuild the £10K.

This calculator: www.moneysupermarket.com/credit-cards/calculator/

£10K debt at 18.9% paid at £208 a month would be cleared in 7 years.

It’s still a no-brainer for me to pay off the debt.

But OP, you shouldn’t act until you’ve got done financial education.

• it was a poor decision to save instead of deal with your debt (excluding emergency pot savings)
• throwing out “3-4 years” shows little detail understanding
• the 20 years also shows little understanding

So morally; yes. Do it. But learn more first. Otherwise you won’t do it right, and you’ll likely be in debt all over again one day.

@girlmom21 agreed. For me that’s the issue, not the fact about whether it’s stealing or not. It is taking out a loan to pay off another loan they cannot afford. How exactly would that help the situation.

X posted in regards to the circumstances of the debt.

OP are you the parent?

The parent can make the repayments, but the difference between the very low interest on savings and the very high interest in credit cards is what makes the difference in how long it would take to repay, and how much it would cost to repay.

Payments have never been missed to the credit cards, it is just the issue of high interest.

It's your money so no issues at all.

[quote ithinkilikeit]@girlmom21 agreed. For me that’s the issue, not the fact about whether it’s stealing or not. It is taking out a loan to pay off another loan they cannot afford. How exactly would that help the situation.[/quote]
Because the interest they would have to pay to compensate for the interest lost on the savings will be much much less than the cost of the interest which they'd have to pay on the debt.

Sounds like these parents started a savings account for their child when they could ill afford it whilst having some misguided idea that it was a ‘good thing’. If they have debts it is obviously a bad thing. Of course they should use the money to pay off interest bearing debt. Otherwise they are paying for these savings twice- first the actual money and then the interest in the debt! They could always open another account for their child if and when they are debt free.

YANBU. Being out of debt with a roof over your head, being able to pay bills and put food on the table is much more important. We started savings accounts for our children then realised we were being mad to put money in every month that could be going to clearing debt instead. Ours are in junior ISA's so can't take the money we've already paid in back out, or else I definitely would. A couple of years later and we are very near to debt free and will start paying into savings again once its all clear. Do it OP.

20 years worth? Seriously?

I don't think you'll pay it back to your kid but there you go. You don't need to keep calling yourself "the parent".

Why would you be putting money away for your kids when you can't afford to do that?

Have you posted this before?

If not the exact same dilemma had a long thread recently, maybe someone can link and you can see what the iews were then

@IveGotASongThatllGetOnYNerves

YANBU. circumstances change. The parent put their money into an account with the intention of eventually giving a lump sum. They will still be giving that lump sum. I don't see the issue

My parents started a savings account for my children when they were born. Some years later they got into a serious financial mess and I told them use that money. It's stupid to be struggling while you have a pot of cash you wanted to give away years in the future.

I see it differently to most posters I think. It's a savings pot that you're putting into with a specific aim in mind. It doesn't mean you can't re-evaluate if things change.
Oh my boiler packed up and we've no heating or hot water but I can't use the £5grand I've got saved up for when my 5 year old turns 21. 🙄

This!

The problem is that the parent has been irresponsible enough to get themselves into such debt. I wouldn't trust that they will then be sensible enough to repay the savings, plus interest on top of any other savings contributions would have been made during the repayment period.
But it's better for the child to have a parent not struggling to repay debt.

It isn't good. And the parent should feel pretty shitty about it but yes, it seems sensible to use those saving instead of falling further in to debt.

I would use it. And feel badly about it. And get it paid back in full ASAP.

I don’t get the idea that this is stealing. The money has been put in the savings account for the child by the parent. Perhaps instead of using it to pay the debt of use the money for the benefit of the child - don’t know their age but use it for nursery bills, wrap around care.
I am aware not everyone will agree with me and will still call it stealing.
Otherwise if you don’t use it stop the standing order and use that towards the debt as well.

Look your saving money for your child, until you hand it over it is still your money.
Pay off the debt and repay it, if you feel you need to.
if you want to you can transfer the money to another account maybe a year before you hand it over, so your child never knows about your using it and it really can just be a gift you give them when older.
They never need to know you used the money YOU were saving.