More than 20 million parents gifting to children due to cost-of-living crisis
The Bank of Mum and Dad is firmly open for busisness and doesn’t look like it will be closing branches anytime soon. And as inflation reduces non-essential budgets, children are turning to their parents to sustain their lifestyles, education, and essential costs.
According to research from Handelsbanken Wealth & Asset Management, two-fifths of parents (which equates to 20.7 million people) are supporting their adult children and grandchildren financially.
Indeed, one-sixth of parents are planning to increase previous funds to their children, although 9% are cutting back.
Christine Ross, head of private office (north) and client director at Handelsbanken Wealth & Asset Management said: “As the cost-of-living crisis persists, it is often falling to older generations to support their family through the financial hardship.”
“It is important for those either heading towards retirement or already retired to ensure their finances are in order – both for themselves, but also for their family members when they need it the most. To work out what you could afford to gift, calculate your likely annual expenditure in retirement and allow for an ample buffer beyond that before committing to any significant sums.”
Holidays, education and utilities
Almost half of parents are subsidising holidays for their offspring with 10% planning to increase previous support. A total of 44% are funding education costs for children and 43% are spending on utility bills.
There are regional differences in parents providing financial support. Almost half of parents in the East of England are financially supporting their children and 20% of parents in the North West and London are increasing their current levels of support – the largest percentage. Northern Ireland has the highest proportion of parents (26%) reducing financial support.
Ross said: “When giving your family members a financial gift, there are a couple of things that can be done to help ensure the money is spent as intentioned. There has to be a level of trust and acceptance over what happens to the money once it leaves your account. As a starting point, you could ask the recipients to sign a letter of intent, stating what they will use the money for. While this letter is in no way legally binding, it can pull on the conscience of a relative and encourage them to spend as agreed.
“Additionally, if the money is given towards a house that will be shared with a partner, a co-habitation agreement or Living Together Agreement (LTA) can be drawn up. This is a legal document common among unmarried couples that establishes how any assets will be divided upon the breakdown of the relationship.”
A growing trend
The figures are similar to those from Aldermore Bank from February which noted that one in three parents were helping their children financially. Meanwhile, in March, a survey from Legal & General found that nearly 80% of grandparents were supporting their grandchildren financially.