It's getting more difficult for parents to make ends meet, and some are resorting to taking money out of their children's savings accounts to do so. Here are some reasons why it isn't a good plan, and some suggestions on how you should work things out if you need to.
The rising cost of living throughout the world has forced some families to consider dipping into their children’s savings accounts to make ends meet.
Even the most economically advanced nations are not exempted to this reality. According to a survey in England (2016), nearly half of the parents have admitted to “piggy bank raiding” on occasion to pay for things like parking, takeout, taxis, school trips, or even the window cleaner despite their good financial reputation.
About a third of the parents said they felt guilty about borrowing money from their children, although the majority (80%) indicated they plan to pay back the money they borrowed.
Even though more than half of children don’t even realize the money is gone, it is comforting to know that most parents return back the cash, with one in seven paying back more than they borrowed to alleviate their guilt. These findings suggest that there may be stronger motivation for parents to push their children to begin saving early in life.
Singapore isn’t exempt from the cost of living crisis…
The rising inflation and high living costs make it tough for families to get by. In Singapore, study reveals that a family of four (two parents and two children) needs a monthly income of between S$5,800 and $6,400 to meet the most basic of expenses.
How much allowances do children receive?
In a survey conducted on Asianparent’s Facebook, any mothers of secondary school-aged children provide their children with a daily allowance of $5–$10. This is allotted for their food or things they need from the bookshop. Sometimes they also give them extra for extracurricular activities. The majority of their savings, however, are most likely to be built up from cash presents they receive on birthdays, holidays, and other special events.
Reasons Why Parents Touch Their Children’s Savings
According to a survey based in UK, here are the top reasons why parents had to touch their children’s own savings:
- Needed cash for daily necessities
- To keep from having to deal with an overdraft by accidentally exceeding their balances
- To help cover an unexpected expenditure
- To have emergency funds set up just in case
- To help pay for treats for the children
Some moms might need it for their sought-after nails but that’s fine. After all, when prices here climb, you may find yourself occasionally inspecting your child’s piggy bank.
What Are The Consequences of Touching Your Children’s Savings
So, you might be wondering, “So what?” I’m keeping the money for personal use; they probably don’t have any pressing financial obligations.
On the surface, this may make sense; nevertheless, studies have shown that spending and saving elicited different feelings among children as young as five, and these feelings were translated into real-life actions. In addition, the results imply these attitudes and spending habits were not acquired from their parents.
This means that your children might be at risk of developing problematic money attitudes even if you did not model them yourself.
You should consider the following consequences before touching your kid’s savings.
Broken trust
Financial advisors (FAs) are often linked with a negative impression due to the common concept about them– being pushy and duping people with “let’s have coffee” into endorsing some of the insurance products.
Despite how much you dislike them, FAs could turn out to be very significant in your life.
In the event of an emergency, they should be among the first persons you contact, and the ones to assist you with any claims you have.
Since you can never predict the future, even the most affordable health insurance plan must be a top priority. Without health insurance, you’ll be stuck with a pile of unmanageable debt should something happen to you unexpectedly (crossed fingers).
If you don’t have health insurance, you could spend hundreds of thousands of dollars on unexpected medical care overnight.
Not sure where to start? Learn more about the various types of insurance policies that can provide financial security for you and your loved ones by reading this article.
Instilling a negative attitude toward money
Taking from your kids’ funds can make them cynical about saving in the future (after all, why bother to save if you’re just going to take it away anyway?). The ability to save money is essential to building wealth, thus this is a bad sign.
Moreover, your children might internalize the message that it’s fine to be irresponsible with money because you can always borrow if you find yourself short of cash or budget. This may encourage them to use unsecured forms of credit like credit cards and personal loans.
Furthermore, the mental health implications of having to use their savings to meet home expenses may be the same to those experiences they had when they were still living in debt-burdened households.
How to handle the situation if you need to touch your kid's piggy bank
As the old adage goes, “needs must when the Devil drives.” You may have to dip into your child’s money to get through a rough patch.
Here are some ways you can assist your child cope with the experience and perhaps benefit from it.
Don't hide the fact that this is a loan
Make it clear to your child that you are borrowing the money and will return it at a later date and not take it away.
Help them regain faith by assuring them that the money is still theirs.
You should make sure they know why
It’s important to tell the truth about why you need the money from their savings accounts.
However, avoid making them feel burdened and worried by using guilt, threats, or fear to get them to agree. They might also begin to feel guilty or anxious about money.
Make it clear that the family’s financial troubles are not their fault, but that they can still offer assistance if they want to.
That way, they won’t end up feeling helpless and terrified, but rather, empowered.
Repay the loan on time
Don’t just put the money back without telling them you did it. Inform them to keep their trust.
Do not get defensive if you are asked about the repayment plan if you end up being unable to pay back the money on time. If paying back the loan will take longer than expected, you should be honest about it.
To handle your children’s funds so formally may seem crazy. However, you should know that you’re risking a lot more than a few hundred dollars by making this investment (or whatever the sum may be).
Taking money out of your kids’ savings can have a profound psychological effect, so be careful.
If this is a common occurrence, setting a positive example by treating the situation with dignity and respect will go a long way toward preventing your child from developing unhealthy attitudes and behaviors related to money.
Conclusion
You should help your children develop a lifelong habit of saving by doing things like opening a savings account and keeping track of weekly spending alongside them.It’s crucial to treat your children with respect, and stealing their savings would only sow seeds of distrust and suspicion in your relationship with them. Establishing mutual respect and trust within the family through open communication and asking permission if you ever need to tap into your child’s reserves helps unite the family and makes your bond even stronger.