The survey was undertaken by Guarantor Loan Comparison in May 2019
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The so-called Bank of Mum and Dad is becoming increasingly important to the UK housing market, particularly for first-time buyers. With many children reliant on financial help from their parents it seems that, when it comes to money, there is something of a generation gap.
We wanted to see if this was really the case, and whether there are areas of finance other than housing in which parents are trying to help out their adult children. And, for those who have borrowed from the Bank of Mum and Dad, will they pass those loans and favours on to their own children?
To find out, we asked 18-44 year olds from 147 companies about their financial experiences, including how much they rely on their parents, how they plan to support their own children, and where the responsibility lies in terms of teaching the next generation about finances.
A Generation Game
Today’s economy is very different to the one in which previous generations lived. Wages have been squeezed, thanks in part to the rise of the ‘gig economy,’ and living costs have risen. Even young people are feeling the pinch: in 2018, the London Institute of Banking and Finance reported that 71% of 15-18 year olds already have money worries.
So it is perhaps not surprising that, for families in a position to help out, financial aid from parents is common. In our survey, 59% of 18-44 year olds said that they have been supported by their parents in the past year, with a significant portion – 24% – admitting they couldn’t afford their current lifestyle without parental help.
When we look at the breakdown by age, we can see that younger children get more financial help, with 78% of 18-20 year olds receiving parental support. This reduces through the age groups:
But it is interesting to see that 35% of 35-44 year olds are still receiving financial help, even though they have had more time to save. This may be explained by an issue that preoccupies all those in our survey: housing. The average first-time buyer today is 30, and the financial pressure on those wanting to buy a house is higher than ever.
Getting on the property ladder
Our survey certainly revealed housing as a big area of concern – 46% of 18-44 year olds said this was the topic they needed most support on. As our interactive graph shows, women were more likely to look for support in this area, with 55% listing house costs as their biggest concern, compared with 30% of men.
House prices in the UK may have fallen slightly recently, but in recent years the market has reached record highs. Prices are also increasing for renters, particularly in London. Our survey reveals that many have received help with housing costs from their parents. In the past year, 26% had help with a deposit and 13% received a rent or mortgage contribution. And as the interactive graph shows age is a major factor, with 50% of 35-44 year olds receiving help with a deposit compared to 10% of 18-20 year olds.
Across all the age groups, parents also offer opportunities to save: 40% of 18-44 year olds get parental help with food bills, 25% live rent-free, and 16% pay reduced rent.
Money and gender
In terms of attitudes to money, there are some telling gender differences. When asked what topics they wanted support on, 21% more women than men said ‘salaries.’ With the gender pay gap – the average difference between hourly wages for men and women – continuing to widen, making money is more of a concern for women. This may explain another insight: when we asked parents of over 18s about the financial topics they discuss we saw that overall, women talk more than men.
Debt is the financial topic that parents talk about the most, followed closely by savings:
But for all these financial topics, it is women who lead the discussion. Take a look at the gender split in our interactive graph – 70% of mums said they would talk about debt, as opposed to 59% of dads. When it comes to credit scores the gap is even wider, with 63% of mums prepared to discuss the topic compared to 27% of dads. In fact, 9% of men said they don’t talk to their children about financial matters at all, but none of the women said this. It seems that, as women are more likely to be concerned about their own salaries, they are also more likely to share financial experiences with their children.
The Parent Prop
Many of the parents we surveyed are also offering financial help to their children. 55% of parents of over 18s said they had contributed to or paid for their child’s monthly bills, and 51% had also helped with food shopping.
In some cases it seems those who are helping their over 18s are also still receiving aid from their own parents: 53% of those with over 18s said that, although they don’t rely on their own parents in any formal way, they do still receive some financial help.
Educating the next generation
With parents continuing to help their children financially, we also asked those with under 18s who they saw as most responsible for educating children about finances. 78% said it was their job as parents, although 72% also felt secondary schools have a role to play. It seems young people agree, as data from the London Institute of Banking and Finance revealed 83% of 15-18 year olds wanted to learn more about money in school.
However, schools are not devoting as much time to money matters as parents and students would like – although 62% of young people say they receive financial education, 52% say that it amounts to less than an hour a week. For most students, it is a lot less.
So the burden falls back on parents. But what can parents do if they are unable to lend money directly? There are alternatives. In terms of buying a property, the government provides some assistance through Help to Buy ISAs, low-interest loans and shared ownership schemes. Another option is for parents is to act as a guarantor for their adult child, with guarantor loans providing a viable alternative to the payday loans and high cost credit options that can lead to a lifetime of debt.
Whether acting as a guarantor or lending directly, as the interactive graph shows, many parents do envisage helping their child out in the future. More than half of those with under 18s imagine assisting with a house deposit, although less than half are actively saving. Life is uncertain, and with our shifting economy and changing job market it remains to be seen how far parents will be able to support their children.
However, with 60% of parents imagining their children will stay at home as long as they need help and Lloyds recently announcing a 100% mortgage based on the Bank of Mum and Dad, for now it seems the Parent Prop is still very much in play.