What does the bank of mum and dad really fund?
With the generational surge in house prices and everyday living costs, research* reveals how many adult Brits are turning to the essential support of ‘the bank of mum and dad’ for financial help.
Pensions advice specialists Portafina surveyed the nation to find out how many are struggling with big purchase costs or even everyday bills and turning to the bank of mum and dad for help. The results revealed that more than half of Brits aged 18 to 45 have savings that have been added to by their parents (56%).
Those who receive the most financial help from their parents are 18-24-year olds, known as Generation Z (57%), with nearly a third of this age group receiving help with their phone bills (30%). When it comes to men versus women, more men admitted to having received monetary help from their parents (66% vs 51%) but topping the spends that both sexes needed financial help with was their first car.
But how many are willing to admit to their peers that they turned to ‘the bank of mum and dad’? The majority of Brits are happy to admit that they couldn’t have afforded key life purchases without their parent’s help (77%) and only 6% confess to covering up the truth due to embarrassment.
Delving into the main purchases/financial costs ‘the bank of mum and dad’ is helping Brits fund, Portafina’s research reveals the top ten items Brits have bought with the money they were gifted:
- A first car (30%)
- Holidays (23%)
- Deposits for a first house/flat (20%)
- Wedding costs e.g. dress/suit, venue hire (20%)
- Support with costs involved with driving e.g. insurance, petrol, maintenance (17%)
- Household bills (17%)
- Education e.g. university fees, accommodation costs (17%)
- Support with first property costs e.g. solicitor fees, furniture (15%)
- Subsequent car/cars (12%)
- Phone bills (9%)
When asked why they wanted to help their children out with cash gifts, the number one motivator parents listed was that they didn’t think their children would manage without their help (39%), closely followed by having the disposable income available (38%). Parents that had received financial help from their own parents (25%) want to help their children in the same way. Sibling equality was also listed as one of the main reasons Brits receive financial aid, as it’s “only fair” if previous siblings also had a helping hand.
Beth Turner, a 23-year-old writer from York wrote her car off in an accident in March this year. Living in a remote area and being unable to get to work without one, she had to replace it, however, couldn’t afford a new car by herself. “My dad found a new car for me which was £4,000 – I put forward £2,000 from my insurance provider, my dad put forward the remaining £2,000 and I pay him back £150 a month. I think my parents were in a position where they could afford to help me out and it was a nice thing for them to be able to do. There was also the fact that I wouldn’t be able to get to work without a car or afford one myself!”
India Benjamin, a 26-year-old marketer from Hertfordshire was only able to step on to the property ladder when she moved to Leeds due to the generosity of her dad.
“When the house I was renting in Leeds went up for sale, my dad offered to pay the deposit so I could purchase it. I didn’t expect him to offer and I’m not embarrassed about telling people I had help either – without his help I don’t think I’d have been able to get on the property ladder this early. He’s also said he will be doing the same for both my siblings.”India Benjamin
The study also revealed that more than half of UK parents (52%) have gifted up to £5,000 to their children with no expectation of it being paid back. Nearly one in ten (8%) had gifted up to £20,000. Despite this, two-thirds of Brits aged between 18 and 45 said they didn’t expect their parents to gift them money (65%).
Commenting on the research, Jamie Smith-Thompson, managing director of Portafina said:
“We have much to thank our parents for if this top ten list is anything to go by. But it’s safe to say not everyone will be in a position where they can help, despite best intentions.
“When it comes to helping their adult children, parents should take a moment to consider their own financial position. It’s great to want to be able to help, but it’s ok to say no if you feel it will be detrimental to your own plans.
“As a dad it’s music to my ears that children generally don’t expect to be gifted money. Of course, there are some horror stories of adult children leading the life of riley at their parents expense. But this shouldn’t detract from the fact that it’s natural for parents to want to give their children a head start in life.
“For parents of younger children there are a number of things you can do now to help with financial independence in adulthood. It will mean you won’t need to find a big lump sum of cash when the time comes.
“From bank accounts and Junior ISAs to Lifetime ISAs or pensions, you may be surprised at some of the options available for parents and the wider family to contribute to young children’s savings. It’s simple to get started with any of these, and there really is no time like the present when it comes to saving for their future”Jamie Smith-Thompson