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

*Parent has explored and exhausted all other options to reduce the cost of borrowing^

If the parents financial situation is that bad, I’m not sure that it’s possible to say it’ll definitely be paid back. I appreciate parent is intending to pay it back, but that doesn’t match any of the financial information given in the post …

Exactly this. "They'll pay it back" is always tacked on to sweeten the pill, but come the day there's another excuse as to why it can't be done ... and another ... and another

If the parents financial situation is that bad, I’m not sure that it’s possible to say it’ll definitely be paid back. I appreciate parent is intending to pay it back, but that doesn’t match any of the financial information given in the post…

I think this is the issue.

If the parent has going into such bad debt management without addressing it sooner, it really would depend on what that had happened.

If it was a one off issue - probably relating to an extra ordinary situation like covid - which has now reversed, I think its probably not a bad option.

However my concern is that the parent is just shit at managing their money and this is merely the latest source of funds, which don't really address the underlying problem of financial management. And what happens when thats been used up?

Of course, if the alternative is the child loses their home, money sitting in the bank is pointless.

If you are 'saving' for your child's future whilst simulantaneously falling into debts, you couldn't afford to save for the future in the first place and smacks of not really being in control of outgoings... And thats my overal take - whats going to stop the credit building up again? What other options are available here - including selling items (whats the credit been spent on?)

If there's a poor habits going on here - looking for new sources of loans / credit because no one else will now facilitate them - thats the core of the issue not a moral dilema about children's savings.

@ManifestDestinee

YANBU. You put the money in, it's your money.

Anyone saying its stealing and you shouldn't is daft AF. Should you be stuck in debt for years, taking money that could benefit your child, just so randoms online don't call you a theif? Fuck that.
The right thing to do for your kid is sort your finances out. Borrow the money, put it back later.

THIS.

It's not stealing, it's your money. Your kid doesn't need "savings" they can't even access for years and years, they need unstressed parents who aren't being crippled by high interest fees. Take the money, pay it back if you can, don't stress if not. I can't afford to save for my kids, not everyone can.

On the face of it, it seems as if the child's money is being treated as family money and is not a legal gift.

if paid off, the credit accounts will be shut down so that it is not possible to accrue large debt again

Like PPs, I'm somebody with financially feckless relatives who have been bailed out time and again and repeated their behaviour. I don't understand why the OP is so confident that the money would be repaid. Credit is essential for some things but I wonder why cards/online spending isn't stopped now until the accounts are paid in full and closed.

If there are not new problems, I don't see why a move to another 0% card isn't viable unless it means that in current circumstances repaying the debt isn't possible at all.

However, yes - it's miserable growing up in an indebted family. You may well need to reconcile yourself to the fact that your child will never see this money and it is a very expensive learning experience for everyone involved.

@Mantlemoose

It's your money so no issues at all.

Not if it is held in the child's name.

If it’s money the parent had paid in then it’s probably okay, buy if anyone else had contributed to the savings then that would be a no from me

@CecilyP

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.

This....

My parents spent money left to my siblings and I when we were younger, to the tune of £20k. We've not had a penny of it back so it doesn't sit right with me either

But if they can't pay it back ever then so what, really? Their child will have no savings, like plenty of other children in this country. But at least the family will have been able to afford to live a bit better for the next 15 years or however long and not be constrained by debt.

For some people, that's a choice that has to be made. Both is just not an option. It's easy to get into debt when life throws a curveball. Many, many people are not able to have six months of wages in their account or enough money to buy a new boiler when theirs packs in. Savings are a luxury that many can't afford, and you should almost always get rid of expensive debt before you build savings.

I'd first recommend raising the savings direct debit in line with the plan to repay, with interest, because really what's being looked at is that amount on top of what would already be added in if continued as things are to get back to 'even'. That needs to be set and in the budget if they're going to meet this goal (unless the goal is to have X for them by the time they're 18, then recalculating payments to get there would also work. I chose this type of goal because there were times when my older two were small when I had to stop savings payments).

Second, I'd recommend checking the terms and conditions of the child's account because not all of them allow a parent to do that even if it's all their money put in, some that give higher rates for kids accounts will penalize that or only allow X number of withdraws before the child's of age.

As others said, it's not ideal, but I can see the benefits of getting out from under that if the type of account they have will enable that without too much issue and the budget can then be readjusted for a larger savings payment for the child.

@Aroundtheworldin80moves

In the long run, the child will benefit from their parent not being in debt.

However parent should also be careful not to get into more debt.

Exactly , but leave trying to save for your DC until you're in a better position financially. Not everyone can afford savings - unfortunately you can't at the moment.

@BeagleMomma

No.

My parents used £3000 to clear off debt that my grandma had saved for me. Never got it back.

Whereas when my brother got to 18 his was still intact and he got it all.

I've never quite forgiven them.

I know how you feel, a bit.

When I got a scholarship to a posh school, my DPs couldn't afford the uniform. I had to take all my savings out of my post office account to "lend" them to pay for my blazer (equivalent to more than a week's wages for my dad).

It left me oddly aggrieved for years. I was really upset at the time. They were incredibly generous when I was an adult and they were quite comfortably off, so I've no idea why it bothered me so much. The broken promise, maybe?

Anyway OP, unless the parent with the debt cuts up all their cards and never gets any more credit, I'd be sceptical about it being repaid, tbh.

I would use the kids money. I have put 2000 of my money in each of my kids accounts to gain interest. I was ever in financial hardship I would definitely use it, I put it there!

YANBU providing it's money you have put in (rather than say, DC's other parent). I agree with the other comments - until it actually enters DC's possession, it's your money; please use it to clear your debt.

Some people are just completely out of touch with reality.

Money I've saved for DC is in my name and they'll get it if and when I see fit. I wouldn't like having to use it this way, but if it was in the interests of the family's financial security and therefore DC, I might.

Money given by others is in their name and absolutely wouldn't be touched in this circumstance, but that's different.

If the same parent who would use the money is the one who saved it, then its their money. Child is too young to know any different and having a few hundred/thousand pounds when you turn 18 isn't preferable to having a financially secure upbringing with a parent who can feed, clothe you etc without being worried about how they'll afford it. Kids will pick up on that.

Ideally, pay the money back, but saving when a child turns 18 isn't a given or a necessity, a secure, happy family is.

@ManifestDestinee

YANBU. You put the money in, it's your money.

Anyone saying its stealing and you shouldn't is daft AF. Should you be stuck in debt for years, taking money that could benefit your child, just so randoms online don't call you a theif? Fuck that.
The right thing to do for your kid is sort your finances out. Borrow the money, put it back later.

Totally agree!

Thanks for all of the opinions.

Absolutely right that over the years there have been some financial mistakes, including the desire to keep putting money into child’s savings while having debts elsewhere. Attitude towards spending has matured significantly over recent years and expenditure is now managed carefully within income, and no new debt has been added to the pot for quite some time, hence why I am confident that the situation shouldn’t re-occur.

I have been repaying steadily for a few years now, however 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. (I won’t name the company but it was reported in the news that this particular company had cut thousands of peoples limits by 90% at very short notice, so it wasn’t just me affected).

The amount of debt is less than the amount in DC’s savings, so I would be able to pay everything off completely and then fully dedicate the money that I had been using to pay credit cards to repaying DC.

I think it’a most sensible for the parent to pay off the debt as that’ll benefit the child too

I would say that the parent can't afford to pay into the child's savings if they're getting into that much dept.

@Reallybadidea

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.

This. It’s just your money with the intention to save for your child. You need it to provide for your child now. I really cannot see the big drama.

It’s your money.

Use it to pay off your debt and do not feel guilty at all.

The YABUs are ridiculous

Do it if you need to, it's your money that you've put in. If it was gifts from family or friends then it would be a bit different, but clear the debt.

Currently it’s your money. Unpopular opinion, but maybe you should just consider taking the lot and with no intention of repaying. Then close all your credit card accounts and restart the child savings again but into an account that can’t be accessed, I know there’s ones that you have to give quite a bit of notice to access the account.

Don’t feel bad about some randoms on the internet telling you off.

I can’t believe some people liken it to stealing. FS if the OP didn’t put in in the first place, there would even be any savings. The child has no concept of it anyway. You need it now so use it now.