The ‘Bank of Mum and Dad’ is under unprecedented pressure to bail out dependent children at the expense of parents’ own retirement plans, according to wealth manager Brewin Dolphin.
An exclusive national survey, carried out by YouGov on behalf of Brewin Dolphin, shows that the parents of today’s under 18s are planning to delay retirement, compromise their lifestyle and dip into their hard earned pension pots and home equity to help out their children and grandchildren.
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35% of all parents believe that in their lifetime they will have to contribute between £25,000 and £100,000 per child in order to cover home deposits, university fees and other living expenses.
"The Bank of Mum and Dad is facing its own financial crisis across the country," warned Nick Fitzgerald, Head of Financial Planning at Brewin Dolphin. "Our planners are finding increasing numbers of anxious clients facing demands from their children who cannot get on the property ladder or need financial help with other areas of their lives. The pressure is such that we’re also seeing the emergence of second generation funding from the ‘Bank of Grandma & Granddad’."
The pressure on families is far higher than it was even a few years ago, with 40% of parents of today’s under 18s believing that they will have to compromise their lifestyles because of the demands on their children, compared with just 26% of parents with children who have already reached adulthood.
"While many parents are willing to give, it is important that this is not done at the expense of their own retirement planning, particularly given the current uncertainty around annuities and income generation", Fitzgerald adds. "People in their 30s and 40s now will generally not enjoy the pension pots their parents did, and this survey shows a worrying trend towards parents needing to choose between helping their children and sacrificing their retirement savings. It is important to take proper advice and consider the future before signing cheques to your kids, however well intentioned."
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By GlobalDataThe YouGov Survey showed the following top findings.
Financial implications
- 36% of all parents believe that being the ‘Bank of Mum and Dad’ will compromise their lifestyle, and 8% think they will need to downsize their home to release equity
- 16% of all parents believe that they will have to retire later because of a need to help out their children, rising to 25% among those with children under 18
- 14% of all parents believe that helping out their children financially will reduce the size of their pension pot, fuelling concerns about source of income in retirement following recent regulatory changes
Levels of spending
- Over a quarter (27%) of parents with children under 18 anticipate that in their lifetime they will spend an average of more than £100,000 on each child
- 43% of all parents are planning to give their average child between £25,000 and £250,000 in financial aid, equating to £50,000 and £500,000 for a family with two children
- 2% of parents are planning to give half a million pounds or more to each child, on average
Areas of parental help
Parents who have already given money to their adult children have focused on housing, grandchildren and education, as well as buying their child’s first vehicle.
- Almost two fifths (38%) of all parents have needed to assist their children with housing costs, which could be due to rocketing house prices, stringent new mortgage rules and rent increases
- 27% have given money to help bring up the grandchildren, creating a ‘Bank of Grandma & Granddad’
- A quarter (25%) of parents have helped their children with university fees as UCAS applications have continued to rise despite increased tuition fees
Younger families under pressure
The parents of younger children – currently under 18 – are facing far greater pressure to bankroll their children than those with older children. Their expectation of the support they will need to give is far higher, as is the expected effect on their lifestyles.
- 25% of those with children who are currently under 18 expect to retire later due to financial demands from their children, compared with 10% of those whose children are already over 18
- 11% of parents with children under 18 will need to downsize their home to give to their children, compared with 7% of those with children over 18
- 4% of parents with younger children think they will need to take on riskier investments to target higher returns because of the family’s financial burden, compared with 1% of those with older children.
