Millions of parents and grandparents raiding their children’s savings to cover mortgage costs
One in five parents and grandparents have resorted to raiding the savings and investments accounts of their children to meet mortgage costs since the beginning of last year ,according to research from a major insurer.
Research complied by Direct Line Life Insurance found that so far this year, parents and grandparents have withdrawn £13 million a day from their children’s savings, to help with the financially crippling cost-of-living crises. On average, each adult who has dipped into a children’s saving account has withdrawn £433.
Direct Line estimated that this pattern will continue, and that an additional £2.1 billion will be withdrawn by parents and grandparents from their children’s savings by the end of this year. This would be at a rate of £408 per adult.
Family saving culture “under threat”
Worryingly, the study concluded that the family savings culture in the UK is under threat, due to high inflation and the Bank of England base rate at a 15-year high of 5%. Many families are faced with having to make tough financial decisions, and it will hurt many to have to turn to savings that have been allocated for children.
Over half of parents and grandparents have said that they have reduced the amount that they save for their children, or put a stop to it altogether. It’s expected that on average the amount of savings contributions for children will be reduced by £123 per month.
The average parent saving for a child has reached £3,291, this places the total savings pot UK-wide at almost £80bn, but this is still down 15% from the £94.1bn that was accumulated in 2022.
Other costs are also forcing parents to delve into children’s savings accounts, with 22% of those asked saying that they took the option to cover childcare costs. Meanwhile, a further 21% said that they used savings for children to buy clothes, and 19% said that they dipped into the savings for food costs.
Hannah Donnison, communications manager at Direct Line Life Insurance, said: “With interest rates rising significantly, families are having to make tough choices regarding their finances and even having to raid their children’s savings to cover costs.”
“With inflation remaining high and continued pressure on household budgets, it is important to remember the value of protection should the worst happen and life insurance can provide a valuable safety net for families.”