Payiing into child's savings account while in debt

halp... · 20 January 2020 at 1:14PM

Hello everyone, I've tried to search for this but couldn't find an answer - maybe it's a silly question...

What are your views on paying a small amount (£10-20) per month into a child's savings account when you're horribly in debt? I feel like my debts should be nothing to do with my baby and I would like to pay into his account for at least a year (while it's at high interest), but husband says it's better to put the money into my debts. I just think that £120 in a year will make no noticeable difference to my debts (£40k) but will give my son a good financial head start. He's only 1.

I feel so strongly that I don't want him to feel any of my debt burden.

Is there a sensible approach to this?

Thanks, wise people.

pjcox2005 · 20 January 2020 at 1:49PM

I would say it depends on the interest rates on your debts and how in control on repayments you are.

If at 0% and you've got a working plan to pay them back without causing an issue on the £10-£20 per month or incurring interest then fine, it may be a useful driver.

If your debt is at high rates of interest then I think you'd be foolish (maybe wrong term) to save instead of paying of debt as quick as possible as the long term cost will be more than the benefit to your son. You're better paying off debt and then saving for him afterwards. Say it's done in 5 years, then you could look to save an additional £600 to cover the £120 per year you've not managed to put away.

That though is the practical, maths answer rather than the emotional answer.

Naomim · 20 January 2020 at 3:47PM

I pay £10 a month for both my children into savings. I am £30k+ in debt but I feel happier knowing I am putting a little something away.

I am at the beginning of my LBM and debt repayments and working on a zero budget so the £20 a month I put into savings is accounted for.

Yes, the practical answer is to pay it off debts but I believe, if it makes you feel you are providing for their future then small savings is worth it.

Naomim

Daphne16 · 20 January 2020 at 5:27PM

I put a small amount of money away each month alongside paying off my £14k+ debts.

Although I could make quicker progress on my debts if I didn't, for me it felt like a huge drain on my mental health not building up some savings. That said, I am still overpaying on my debts - if I couldn't afford to overpay, then I would put it 100% to debt.

I think if you feel good about saving for your child and are not risk underpaying/paying interest only, then absolutely do it.

ReadingTim · 20 January 2020 at 5:30PM

halp... wrote: »

I just think that £120 in a year will make no noticeable difference to my debts (£40k) but will give my son a good financial head start. He's only 1.

This doesn't make sense. If it's no difference to you, then what use will it be to him? How much of a good financial head start will £120 per year get anyone? Aged 18 he'll have £2,160 to him name, which will get you even less than it does now because of inflation.

In reality, you're better off throwing every penny at the debt, and involving him in matters such as budgeting, so that he can see what happens when more goes out than comes in. When he's older, start giving him pocket money so that he gets used to buying things for himself, and saving up to buy things he really wants - this is the sort of practical financial education every parent should be giving their kids (not just expecting schools or "the government" to do it), and is far more useful to him in the long run - and cheaper for you.

monetxchange · 20 January 2020 at 7:35PM

I’m in the group of thinking struggling to put into savings accounts for babies while you’re in huge debt is pointless. If you want to continue it, then do it when the debt is cleared.

However, any child would like to grow up with the parents relaxed and happy and not constantly stressed by debt instead of having a relatively small savings pot at 18, which they might waste and then you’ll resent the years you spent in debt. As a previous poster said, £2K might only get you a few nights out in 18 years and not so much the financial head start you imagine! I don’t know anybody that got given a savings account/made useful use of one and they’re all doing fine.

Putting aside for Uni or weddings/a travel trip on graduation that you might want to contribute to without handing over a lump sum is another matter. Maybe have a think if that’s something you want to budget once your debt is cleared. Good luck!

whiz90 · 20 January 2020 at 8:57PM

Is there something that you have in mind for the money to go towards that your child will truly benefit from?

For example I grew up in a rural village, my mum also growing up in the same village before me. Knowing how isolating it was she started a small car fund for me and put a bit away each month as well as birthday/christmas money I received. By the time I reached 17 I had about £2k which paid for my lessons, first car, insurance and tax. I could then travel to the nearest town and started a Sunday job (there were no Sunday buses.) I wouldn't have been able to get my first weekend job without having a car first which I am so grateful to my mum for.

However if the money is for general spending/uni, you child may be able to start their first job at 16 and earn their own, and any fresher at uni will burn through £2k in a matter of weeks, its a sad fact as you get caught up in the lifestyle. In both circumstances that hard earned money is better off put towards your debts as others have stated above.

middleclassbutpoor · 20 January 2020 at 9:32PM

how much are your payments on your £40k of debt?

I bet you could put £120 a month in to the account when you are out of debt.

Focus on getting out of debt as quickly as possible by living as frugally as possible. Wont be easy but you need to act and your whole focus has to be on being debt free. If you are justifying £10-20 a month here, you are easing a pain point which probably is what is going to drive you to being debt free.

Let your goal of being able to save £120 a month once you are debt free and the ability to pay for things which will let you create happy memories with your child without the burden of debt you will do this. At only 1 - you have a good few years to crack this and still have time to provide them with a nest egg/starting fund for when they are older.

Unicorn_cottage · 20 January 2020 at 9:45PM

Focus focus focus on paying off your debt. This will make you happier parents. Make plans for when you are debt free. Are you paying off the debt yourselves or using a debt charity etc?

halp... · 21 January 2020 at 12:17PM

Thank you so much for all your replies (sorry I've been slow to reply, I subscribed to the thread but didn't get any notifications so I assumed nobody had replied!!)

Naomim and Daphne16, it's nice to know I'm not the only one paying into their child's savings when in debt, but I do totally see the rational side of this argument put forward by everyone else.

pjcox2005 thank you for your kind but sensible answer. Unfortunately I don't have a plan, I'm really not sure what the hell I'm going to do, and it's all gone back to high interest rates. I guess my answer is staring me in the face

ReadingTim I know it doesn't make much sense

I guess my thinking is that the difference between £0 and £120 is a lot, but the difference between £40,000 and £39,880 is laughable. But I admit I'm just trying to rationalise my emotions.

The other issue is that his grandparents want somewhere to put some money for him for birthdays etc, and the interest rate is something like 4.8% for the first year if I put a tenner in every month. I've only just opened the account which is another reason I'm trying to justify it.

monetxchange - rationally I do know that £2k when he's 18 won't exactly buy him a house (and I burned through that much myself one summer when I hit 18 and my little pot of life savings was handed over to me!!), but putting aside for something specific is a great idea. I didn't really know what I was saving for, I just felt I had to save for him.

whiz90 that's so nice, and makes me feel as though £120 a year might not be wasted if I raise him right!

(I know it's not that simple)

jeepjunkie unfortunately the child benefit I get goes towards ever-bigger-clothes/food/childcare at the moment... wish I could bank that much a month for him but that would certainly be daft in my situation.

One day...

middleclassbutpoor and Unicorn Cottage - thank you for the boost of inspiration. £120 a month does sound like an amazing goal to work towards. I'm currently paying the debt myself (note: not paying it off...), but very close to getting help with it. I've already contacted a debt charity but not acted on their advice yet (it's complicated). Husband is not on board (despite his views on the savings account - e.g. he spends £50 a month on coffees and hasn't indicated he will change that), but that's another issue.

Ugh. What a silly situation

Thank you all again, I think I can see the right way to move forward.

monetxchange · 22 January 2020 at 11:19PM

I like the idea too odd when you’re debt free, you can save regularly for something specific - like the story of a previous poster who mentioned the first car. It might be good to instil financial sense in the kids early too by making it contingent on something - doing their best in exams/first job or taking on a helpful job in the family home that would help you out for example. If they know there’s the prospect of it being given to them without conditions, it might set off a lifetime of entitlement to money and therefore debt, which I’m sure you’ll avoid

Payiing into child's savings account while in debt

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