One of the biggest financial trends of the past few years has been the so-called ‘Bank of Mum and Dad’. With the costs of further education continuing to rise and many young professionals struggling to get onto the housing ladder, parents are now handing over around £44bn to their children each year in the UK.
A recent report from Lloyds Bank in association with the Future Foundation looked at the dynamics of family economies in the UK. The Family Savings Report found that 70% of young adults currently receive some form of financial support from their parents after they leave home.
With an estimated 4.25 million UK adults aged over 18 currently living with their parents, direct support comes as part of the overall running of household finances in many cases. However, the report also highlights the fact that 70% of young adults also receive some form of financial support from their parents after they have left home. This figure is a marked increase from the 53% who remained financially dependent on their parents in some way during the 1970s.
Chris from Innovo Property advised;
“The question of housing plays a major part in the overall picture, with money for accommodation expenses changing hands to the tune of £11.3bn. The proportion of young adults receiving help from their parents with rent payments has more than trebled and currently stands at 20% today.”
Perhaps most surprisingly of all, it isn’t simply older teenagers on their first steps away from the parental nest that are receiving the most help. Those in the 25-29 age bracket apparently get the most support, with an average of £2,599 given to them annually per UK adult. This is far higher than the average of £1,125 across all age groups.
These age-related figures may be skewed because younger adults are remaining at home longer and so their parents provide financial support which is harder to quantify in the form of free accommodation and other daily living expenses. Currently, 4.25 million UK adults aged 18+ are estimated to live with their parents, an increase of 20% between 1997 and 2011.
Director of Savings at Lloyds Bank, Andy Bickers, said of the research results: “The last two decades have seen a massive increase in the financial demands made on parents by their adult children, and now more than ever, saving for the future is really important.”
It isn’t just the UK that has seen an increase in the financial demands that grown children are making on their parents. In the USA nearly 60% of parents provide financial support to their adult children, according to a survey by ForbesWoman. The National Endowment for Financial Education (NEFE) chief executive Ted Beck explained the report had thrown up some surprises: “Parents are continuing their involvement longer than we expected. Financial pressures are higher for this generation. If I was in their shoes, I would be concerned.”
The study found that one in three American parents agree that their offspring are worse off than they were at the same age, whilst 65% of young adults felt the financial pressures faced by their generation are tougher than those faced by their parents.