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Parents borrow from kids’ savings

Posted in: Research Last updated: 01 Jan 2010

More than one in five parents have been borrowing from their children’s savings account, with 44% of them borrowing between £200 and £500, the majority taking money over five months or less.

The survey of 3,000 parents, conducted by child trust fund provider Engage Mutual Assurance, reveals that British families blame the recession for their gloomy financial outlook, and that some have resorted to withdrawing their kids’ cash to stay afloat.

Eighty two per cent of parents who admitted to borrowing, claim the money they have taken is merely a loan, and they intend to pay it back as soon as they are a bit more flush.

But unexpected car repairs, house repairs and other bills have meant they have been forced to find extra money from somewhere.

And eight percent of them admit they wouldn’t be having a very Merry Christmas without a little ‘pocket money’ from the kids.

In 60 per cent of cases, between £200 and £5,000 has been taken out of children’s savings. Forty per cent of those parents forced to turn to their kids’ savings say they did so to pay the bills, and a fifth had unexpected car repairs to contend with. Fourteen per cent admitted they had used the money to pay for a family holiday, whilst 12 per cent had borrowed it for house repairs.

Thirteen per cent of those who borrow from their kids say they don’t know where else to get the money from quickly, and almost two thirds of parents do so only when there is no other alternative.

Karl Elliott, Marketing Director at Engage Mutual said:

“It is evident from this survey that the majority of parents who have borrowed money from their children have only done so because they found themselves in a desperate situation.”

“Almost six in 10 adults admit their financial situation has significantly worsened over the past 18 months.”

“And whilst it might be possible to budget for everyday spending and the usual bills and direct debits, it is the unexpected costs which people find hard to cope with.”

“The problems occur when parents find it hard to pay the money back.”

The poll shows that 30 per cent of parents feel incredibly guilty taking money from their kid’s accounts, and 27 per cent feel saddened that their financial situation has become so dire.

With almost 70 per cent of children in the UK having less than £1,000 in their savings account – borrowing parents could have already withdrawn a significant part of their child’s nest egg.

Rightly, 60 per cent of parents admit they are worried about their child’s financial future.

Karl Elliott at Engage Mutual continued:

“The child trust fund was created to contribute to the long term financial future of today’s children. A simple way for parents, grandparents and family members or friends to save for children, the funds cannot be touched until the child reaches 18.”

“As a savings vehicle, the child trust fund is helping to break the cycle of short term financial planning for families in the UK. Because it is ‘untouchable’ it can help parents avoid the temptation to borrow and the guilt that invariably follows.”