Pressure on the Bank of Mum and Dad is forcing many parents to make significant sacrifices and put their own finances at risk, according to new research from Seven Investment Management (7IM).
In order to help their children, 7IM says 49% dipped into savings and investments, 46% used current accounts, and 9% raided their pension.
According to the study, 36% of parents with adult children are still supporting them, with more than half of those (55%) claiming the support has had a negative impact on their own finances.
Some 38% said that it had stopped them doing things that they wanted to do and 11% said it had forced them to push back their retirement. Worryingly, 6% had gone into debt to help their children out.
It’s not just big ticket expenses that parents are helping out with: 42% are helping with everyday living expenses, 21% are paying for cars, 17% are paying towards university expenses, 15% are helping their children buy property, and 13% are paying down debts.
The news follows research from regulator the Financial Conduct Authority which shows that 72% of the pensions to have been accessed since the pension freedoms were introduced in 2015 belonged to people under 65.
Commenting on the findings, Justin Urquhart Stewart, co-founder of 7IM says: “There has rightly been a lot of attention paid to the financial strains young people are under, from crippling university tuition fees through to inflated property costs, and it’s no wonder parents want to help out. Not only have we had the luxury of free university education (if we chose to take it), many of us are also sitting (for now at least) on property gold mines. None of this is through skill, but sheer good luck, especially for those whose homes sit in the bottom right hand corner of the UK.
“But whilst parents rightly want to help their children, they should not be putting their own financial security at risk in the process.”
‘Little and often is a good approach’
Mr Urquhart Stewart adds that the sooner parents can start putting money away for their offspring, the better. “Little and often is a good approach when it comes to investing for children. Saving £50 a month for 18 years in an investment fund generating 5% annual growth could give you around £17,300 – a good financial head start in life.”