Parents admit raiding children’s savings to stay afloat during pandemic
Parents have withdrawn £2.75bn from their children’s savings to plug financial gaps amid the coronavirus crisis.
Since lockdown measures were introduced on 23 March, parents have collectively withdrawn £17m each day from their children’s savings, totalling £2.75bn to date.
The research from Direct Line Life Insurance revealed that eight million parents (a quarter of parents) have had to raid kids’ piggy banks as they look to plug a shortfall of around £700.
Reduced salaries and job losses have dented household incomes and they’re struggling most with the costs of food, utility bills and childcare.
However, as the effect of the pandemic continues, families said they expect to take even more from their children’s savings in future.
On average, families predict they’ll need to withdraw £862 from their children, which equates to a total of £3.4bn to help keep them afloat during these difficult economic times.
The table below reveals the reasons for parents using children’s savings:
Further, more than nine million parents said the current health crisis means they have had to stop regularly saving money for their children, based on a representative sample of 2,000 adults polled.
On average, parents used to set aside around £130 a month for their children. While many parents saved money for their children to spend as they wish (39%), others started saving for something specific for their child’s future, like a property deposit (27%) or to help cover university fees (24%). One in six wanted this money to help their child buy their first car.
Over a fifth of parents don’t believe they will be in a position to replace lost savings in future which means children’s savings accounts across the country will lose an estimated £960m between September and December 2020 alone, Direct Line warned.
‘Families face tough financial decisions’
Chloe Couper, business manager at Direct Line Life Insurance, said: “The impact of the coronavirus pandemic has been severe and unfortunately means many families are facing tough financial decisions. Widespread redundancies, furloughing and pay reductions have resulted in many households across the country having to cope on a lower income and try to reduce their spending. While it is understandable that parents feel they need to utilise any savings they and their children have to cover costs, this could have a negative long-term impact on their children if this money was being set aside for things like university fees or property deposits.
“2020 has shown us that worst case scenarios sometimes happen, and we may not know what’s around the corner despite best laid plans. Many people will now be thinking about the future and how they would provide for their family if anything happened to them and a life insurance policy can help provide this peace of mind.”