Parents take £17m a DAY from children’s savings

Parents have raided their children’s savings to the tune of £2.75billion to make ends meet over lockdown, says a study.

Job losses or wage cuts have forced nearly a quarter of families to take an average of £700 from savings earmarked for their children’s future, according to the insurer Direct Line.

The survey of 2,000 people suggests the nation’s parents took an average of £17million a day out of children’s savings during the pandemic and could still take £3.34billion more.

Most said it was to cover food, utility bills and childcare. But more than one in ten needed the money for rent or mortgage bills and council tax.

Savings in a child’s name are usually under the control of a parent until a certain age. 

Experts say withdrawals are often possible, but with Junior Cash Isas, for example, parents can’t access the cash until the child turns 18.

Tom Adams, from the advice website Savings Champion, said: ‘Money in a child’s savings account belongs to the child and should only be withdrawn for a reason that is for the child’s benefit. That is to make sure people aren’t just putting their money in their children’s accounts for better rates or tax treatment.

‘However, it is difficult to prove and there is a real grey area around what would constitute being for the benefit of the child. You could certainly argue that basic living costs come under this bracket.’

One 45-year-old mother said she had to take £3,000 to £4,000 from her eight-year-old son’s account to keep the family afloat after her husband was furloughed.  She had been paying in £120 a month since he was born. 

She said: ‘This is the first time we have had to take money from our son’s account and it does not sit right with me. It feels wrong but I have had to do it to keep the family going.

‘If I didn’t, I would have had to borrow money from my elderly parents. I cannot keep dipping into his savings – these were supposed to be for his future.’

She added: ‘If things do not go back to normal we might need to think about benefits, which we have never applied for before. As soon as my husband goes back to work full time again we will replace our son’s savings.’

The research included savings held in accounts in the child’s name, as well as money set aside by parents in their own accounts.

Mona Patel, consumer expert at insurer Royal London, added: ‘This is a very sad indictment of the far-reaching consequences of Covid-19 and shows how desperate some parents have become. They will not have taken the decision to dip into their childrens’ savings lightly but may well have exhausted all other avenues.

‘Saving is such an important habit and it’s so sad that the good intentions of many parents risk being decimated.’