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

YANBU set up a standing order so you know it will be repaid within 5 years maximum.

The debt trap is awful and the DC is likely to miss out out on treats and extras whilst the parent risked sinking into deeper debt.

The "the parent" thing is a bit odd. Did one parent put money into savings and the other spend?

Hmm no I think because the parent made the decision to save money instead of using it to pay bills, pay off debt etc then it's on their head to continue paying off the debt as is.

However, have they looked into transferring the debt to a new interest free card? Think there is a small fee to pay to do it, but probably smaller than the interest over 20 years. Worth looking into that to check.

That makes no sense Smokey as child will lose out - if parent is in debt their childhood will suffer and the extra needlessly paid on maintaining the debt could be spent on the child.

If you've moved from interest free card to interest free card already and you're now in a much better financial position with a much better income, why can't you do that again?

parent has explored and exhausted all other options to reduce the cost of borrowing
Well then parent must know their chances of being able to pay it back are slim to zero.

My gut instinct says not to use the child's savings because a parent who is paying into savings instead of getting on top of their debt doesn't sound like they've got good money skills and I'd be concerned that the child won't get it back.

However if all the money has been paid in my the parents then that is different than money given to the child from friends and family, and if it was going to make a large difference to a rubbish situation then it's probably worth doing rather than paying lots of interest.

Lola they state its money from the parents.

It’s your money; it was your money all the time. Your child didn’t save it from their pocket money or proceeds from their part time job. You tried to save on behalf of your child at an expensive time of your life when you simply couldn’t afford it as evidenced by the fact you’re in debt.

My parents had to borrow some money from me when I was about 9, they told me. We needed a washing machine. Paying off debt is not an ideal reason but as long as it’s paid back with interest then it’s not a problem.

Cecily exactly

That money is essentially your savings for your child. This, of course is a wonderful thing to do for your child and for future expenses but unfortunately you are not in a position to save like that right now. In your situation I would pay off the debt, endevour to get as debt free as possible, cut up the credit cards and educate myself on financial management.
Don't beat yourself up about 'repaying' the savings account, just start again when your are in a better position to do so, and guarantee that next time it won't be touched until your child is ready for it. In my opinion, it really makes no sense for a small child to be sitting on family money while the family is struggling.

People on here are ridiculous. It's your money that you happened to put in a savings account that you set up ffs. It doesn't matter if it is in your child's name - it's you money going in and you are absolutely not being unreasonable to use it how you need to. Saving money is a luxury that many people can't afford and many children, in the real world, won't have savings accounts or loads of money saved by parents or whatever.

You can always encourage your child to save money given to them for birthdays or Christmas or when they are older, from chores or pocket money. But it's not the end of the world if they have to go into the adult world and make their own way without the bank of mum and dad behind them.

I would definitely do this but I'd look seriously at making big changes in the way I dealt with money, too.

@SmokeyDevil

Hmm no I think because the parent made the decision to save money instead of using it to pay bills, pay off debt etc then it's on their head to continue paying off the debt as is.

However, have they looked into transferring the debt to a new interest free card? Think there is a small fee to pay to do it, but probably smaller than the interest over 20 years. Worth looking into that to check.

The OP literally states that they’re unable to do that.

And paid back with interest is a ridiculous concept at the moment. Surely everyone is aware how low interest on savings is at the moment!

Does the child even know about this account? I'm not sure I'd have told them about it in the first place.

I do worry that despite the best of intentions, the parent won't be able to repay the money.

I'm a bit confused as to why the parent has been continuing to pay into a savings account when they have such a massive debt outstanding. You don't save when you're in debt. You just don't.

It's nice to put aside money for your family when you can afford it but it's not that smart to do so when you can't afford to live in the black. That lack of financial awareness doesn't help me feel comfortable that the money will be repaid.

The parent has got to stop paying into that savings account now.

As an aunt and godmother I certainly wouldn't mind if a parent had to use birthday money to pay the bills, but food or put into the electric meter. It is always more important to have food, heating etc now than be able to buy a car for example at some indeterminate point in the future.

Obviously you will have to use it but I highly doubt it will ever get paid back.

Do it. It's money the parent had saved; if it was money from other people then it would be a lot murkier, but it makes financial sense for the family as a whole to pay off the debt and then replenish the savings, instead of savings sitting there untouched and more money being spent on interest.

It might seem distasteful but it's the financially responsible thing to do at this point. Savings can be built up again - interest you pay on debt is money that's gone forever.

PileOfBooks
I know they did.
That's why I was saying if it's money from the parents then it's different than if it was from someone else.

I don’t think it’s great, but I also think it’s better than the alternative of the child potentially going without or growing up in financially precarious circumstances, so an informed decision has to be made.

If the parent's financial situation is that bad then they couldn't actually afford the money they put into saving for the child.

Ignore the posts that tell you it is stealing, not right, immoral etc. It is far less helpful to your child for you to be in debt than it is to be deprived, temporarily or permanently, if a savings account that they don't know about, can't access yet and most other kids just don't have - usually because their parents choose not to go into debt in order to set one up!

So take the money. Pay off your debts. Stop feeling that you must feed a savings account you obviously can't afford. Revisit it all later, when your finances are on a more even keel.

@Cuddlyrottweiler

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.

You have no idea why they got into debt...perhaps, it was paying for childcare, bills, food, due to being on a low income, is this irresponsible??? Sure, it could be for other reasons (TV, holiday, etc) but let's not make assumptions.

I’ve never understood the idea that this is somehow morally wrong. I’ve not done it. I would if I needed to. Friends of mine have. It’s just not a big deal to me.