When a couple has a baby, they will often decide to open a savings account or bond for the benefit of the child. But whether this was opened at birth or at a later age, when things become fraught and the relationship ends in divorce, the question often arises: can a parent withdraw money from the child’s account?
When a couple has a baby, they will often decide to open a savings account or bond for the benefit of the child. But whether this was opened at birth or at a later age, when things become fraught and the relationship ends in divorce, the question often arises: can a parent withdraw money from the child’s account?
If you have concerns about your finances or your child’s money and you feel you need legal advice, contact specialist family solicitor Mark Heptinstall of Slater Heelis Solicitors. He is recognised as a ‘Leading Individual’ in The Legal 500 and ranked in Chambers UK, and is described as having “the amazing ability to bring calm into troubled waters”.
Fundamentally, any money held in an account in the child’s name belongs entirely to them. However, there are many accounts held on behalf of children with one of their parents as trustee. Here, providing the trustee can prove they are using the monies for the benefit of the child, they can withdraw funds from the child’s account. In reality, it is extremely difficult to police cases where withdrawn cash is used for other purposes.
What can I do to protect my child’s bank account?
Most banks or building societies allow parents to set specific limits or requirements as to how a child can use their account. Of course, this also depends on their age and understanding: the younger the child, the more likely the parent is going to have greater control. There are several things you can do to try to protect your child’s bank account. This may include:
- Allowing the child and adult trustee to only deposit money and withdraw funds in specific and limited circumstances
- Cap the number of withdrawals a named account holder or trustee can make
- Limit the total amount of money the child and any other linked persons can withdraw in a day or any transaction
- Restrict how the child and any linked person accesses the account. For example, this could include restricting online banking or only using in-branch banking.
Obviously, these protections can only be applied by an adult trustee, so it is sensible to make sure you are a joint signatory to the account with the other parent from the outset and ensure neither party can withdraw funds without the permission of the other. Even if you were not originally added to your child’s account when it was opened, the other parent can always add in another trustee at a later date.
Is there any emergency action I can take if my partner has withdrawn money from our child’s bank account?
If you are concerned that your partner may withdraw money from your child’s bank account, then you may have grounds to apply for a freezing injunction on your child’s behalf which will preserve the funds. To get a freezing injunction, you will have to convince the court that:
- The course of action is justifiable
- You have a good arguable case
- There is a real risk that the funds would be dissipated
- That it is just and convenient to grant the application
A freezing injunction is not appropriate in every case, and even though someone has acted unreasonably in other areas, it does not necessarily mean that a freezing injunction will be granted.
Legal action for unauthorised withdrawals from a child’s bank account by the other parent
You could open the child’s account with both parents named jointly together with the child and request that both parties signatures are required before any withdrawals can be made. This can be difficult to police in practice, particularly with older children who have their own access and bank card to enable them to use the account for purchases/withdrawals.
You may consider closing the account and reopening another for the child, with you as the only other named party. This provides an element of control and reassurance that the money cannot be withdrawn by your ex-spouse.
If the other parent has withdrawn money without the consent of the child, then you could make a complaint to the bank for the return of the funds since they were not authorised by the account holder. If your bank refuses to refund the monies, you can file a complaint. You can also appeal internally with the bank if they don’t agree with your claim. If the appeal is unsuccessful, you can refer your complaint to the Financial Ombudsman Service.
As a last resort, you could apply to the court for a freezing injunction, as set out above, but this should only be done in the most extreme case as it can be expensive, and the court does not always make the order.
Are there any alternatives to a child having a bank account?
If you believe there is a risk of the other parent withdrawing money from your child’s bank account, prepaid cards, which are usually controlled by an app, can offer a real alternative. These providers give adults more control than child bank accounts, and lets them set spending limits or add rewards. The downside is that there are usually fees for topping up the card, plus an additional monthly fee. However, the upside is that limited sums are more likely to be deposited, and therefore the risk of a large amount being taken by the other adult is reduced to what is put on the card.
If you have children under the age of 18, then a prepaid card could be a great alternative to a bank account. Prepaid cards often come with features that allow you to monitor and limit your child’s spending – usually for a fee. The most obvious advantage is as a tool to teach them about how money works in an increasingly cashless world, besides helping them (and you) monitor their money management.
Because the child can’t spend money beyond £0, it forms a safe barrier, so they can never go over the limit. In addition, only money put onto the card in the first place can be spent; cash is loaded onto the card via an app and is then used as payment in most places that accept cards, in the same way as a debit or credit card. Cards can also be used online and at ATMs to withdraw cash or check the balance, so care must be taken to install limits and controls if you believe the funds are at risk of being withdrawn by the other parent.
The control element is often a big draw for parents, as depending on the card you chose, you can even receive text notifications each time your child spends on the card, setting out how much they’ve spent and what they bought.
Advantages of prepaid cards include:
- App features can monitor spending
- Can get a prepaid card from the age of 6
- Adult has to apply for the card
- Can set spending limits and controls
- Can set ATM withdrawal restrictions
- Can freeze or close the card
- There aren’t usually many eligibility stipulations to satisfy
The parent will need to get an app to open the account with the child (aged 6+) getting a linked account, which can be funded and controlled by the parent’s account.
Age and control over funds
All parents want to prepare their child properly for the demands of the adult world. Giving your child the knowledge they need to manage their finances can help them to achieve greater financial independence later in life. It can also make for better money management skills and a well-rounded understanding of finances.
When children learn about money from a young age, they are more likely to become financially independent as an adult. Children who learn about budgeting, saving, and investing are more likely to make better financial decisions as an adult. However, money management needs to be tailored to the different stages of a child’s development:
- Age 3 – 5: at this age, children can begin to learn about the value of money and how it is used. You can start by giving them small amounts of pocket money and let them use it to buy treats or toys. You can also play games with them that involve counting money, such as setting up a pretend shop or playing with a toy cash register, for example.
- Age 6 – 8: children at this age are ready to start learning about saving and budgeting. Try helping them set savings goals, such as putting money aside for a new toy or a special trip. Encourage them to save money regularly towards these goals. You can also include them in family budgeting discussions and show them how to make a budget for their own pocket money.
- Age 9 – 12: most pre-teen children are ready to start investigating more complex financial concepts, such as interest and investment. This means you can teach them about the importance of earning interest on their savings, or help them set up a savings account or a junior ISA. You can also introduce them to the concept of investment and explain how stocks and share work.
- Age 13 -15: at this age, children can learn about financial independence and responsibility. You can encourage them to get a part-time job or start a small business to earn their own money. You can also help them open a bank account with debit card access and teach them how to manage their money independently.
- Age 16 -18: at this age, many children are thinking about leaving home and becoming independent adults. You can help them prepare for this by teaching them about financial planning, including budgeting, saving, and investing. You can also discuss the importance of credit scores and how to maintain a good credit rating.
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