As part of its cost cutting measures, the government is currently considering how to save money by reducing child benefit payments. One suggestion is to stop payments for all children once they reach the age of 16. However a move like this will be a blow to many families who will not be able to afford the cuts.
The child benefit payment for the first child is currently £20.30 a week which is nearly £90 a month. A cut of this size would add real pressure to families who are already struggling to maintain their monthly bills. It may mean the very real prospect of pushing many families into debt.
Will the loss of Child Benefit increase debt problems?
With other living costs increasing for many families simply tightening their belts and spending less will not be an option. The only way to counter the child benefit losses so that they can afford to keep their children in school past the age of 16 will be to supplement their income with increased borrowing.
The worry with this is that borrowing more at a time when real income is falling and the cost of living is increasing could well push people into serious debt.
As credit card or overdraft balances are used to supplement income and gradually increase, so to do monthly repayment costs. In turn the need to use credit gets greater. Eventually debts increase to such a level that it is impossible to continue making the repayments and there is a real problem.
How can Debt Management help if you lose your Child Benefit?
If child benefit payments are stopped when children turn 16 many families will simply not be able to make up the money they lose by reducing expenditure in other areas.
Some will simply decide that they cannot afford to keep their children in school. Others will keep their 16 year olds in education but will get into debt by doing so.
If families find themselves with mounting debts but are unable to reduce the cost of living, the risk is that they will be forced into using a debt management solution.
It is understandable that the Government has to look for areas where it can save money. However cuts to child benefit payments will have a potentially devastating effect on many families. As such, I would suggest that the Government needs to think this strategy through very carefully before any decisions are made.
