Parents raiding children’s savings to cover bills as cost-of-living crisis bites
Parents are raiding their kids’ savings to cover essential costs such as household bills and to pay down debts, research from a leading mutual has found.
Research by Scottish Friendly, which surveyed 1,000 UK parents, discovered that just over one in five have withdrawn money from their children’s accounts.
The majority or 64% of the parents who have come to increasingly rely on their offspring’s accounts, have done so in the past year as rising interest rates and sky-high inflation began to bite.
A third of children’s savings were put towards household bills, while 32% said that they used it to cover unexpected expenses.
A further 20% said that they used the savings to pay off debts, whereas 19% said they bought Christmas presents with it, and 13% revealed that the money contributed to paying for holidays.
Data from Scottish Friendly also found that the number of junior ISAs that have opened has fallen over the past year. The vast majority of parents are now increasingly worried about how much they can save for their children.
Four our of ten respondents did admit that they could save more, with 54% saying that they have more money saved for their kids than they do on themselves. Two thirds of those parents asked said that are more motivated to save for their kids as opposed to themselves.
Taking from children ‘a last resort’
Kevin Brown, a savings specialist at Scottish Friendly said: “Borrowing money from their children’s savings is a last resort for parents desperately trying to make ends meet. Inflation may be slowing but living costs are still rising and that’s pushing more families into the red.
“Budgeting only gets you so far and if borrowing money isn’t an option, then dipping into your family’s savings is a difficult choice many are being forced to make. As a general rule, it’s important for households to have some money held in cash that they can easily access in case of emergency without penalty and free of charge.
“But if you’re saving for your children’s future then you should think about how best to maximise your potential returns over the longer-term. Saving rates are going up, but there are few accounts paying a rate of interest anywhere close to the current rate of inflation. Parents may want to think about investing some of their money, starting with a little and often approach to make the most of compounding.
“Times are tough for a lot of families at the moment, but things will get better and it’s important to keep one eye on the future and how to make the most of your money for your children.”