Bank of mum and dad bites back

One in 10 grown-up children have lent parents cash during the recession but could be leaving themselves financially exposed

Mark King

Grown-up children are supporting their parents financially
by lending or gifting them cash. Photograph: Getty Images

Thousands of adult children are supporting their parents during the recession by giving or lending them cash, with almost one in 10 adult children saying they had handed over cash in the recent past, and 42% confirming they had gifting money in 2009.

The average cash handout to parents last year was £8,250, compared to £6,500 in 2008, according to research for Scottish Widows by YouGov. A third of parents used the windfall to pay off debt and a further third used it for spending money or living expenses – while 16% needed the money for a house purchase or deposit.

Scottish Widows says its fourth annual savings and investment report shows that parents are merely "sapping back" the average of £13,000 that they lend their offspring during their lives.

One adult who lent £3,000 to her parents (in their late 50s) three years ago said it was a privilege to be able to help out. "I found out my parents had got into a bit of difficulty," she said. "My mum was really upset and told me they were in massive arrears on their mortgage. I was in a position to help so I rang the bank and took a two-year loan out to help them get back on the straight and narrow.

"They had helped me out a lot over the years, so it was a nice feeling to help them for once. They paid me back but I made sure that if they got into difficulties again I could afford to keep up the repayments. I'm not sure they spent the money as wisely as they could have, so I'm not sure I'd do it again, although I will always try and help them."

The research indicates that grown-up children are leaving themselves exposed by handing out money to their parents: 28% of those who had given money had to dip into their savings and investments in order to give their parents the cash – and 35% of those believe they will have to give or lend their parents more money in the future.

Iain McGowan, savings expert at Scottish Widows, said: "The 'bank of mum and dad' is calling in its debts and sapping more money than ever from their children. It is likely more parents will have to ask their kids for money in the future, particularly parents who are near to retirement and are struggling to put enough money aside.

"It's no surprise that significant holes are left in parents' finances and these will need to be filled in somehow, whether by sapping funds back from their children or by other means. This reinforces the need for parents and children to plan their finances and start preparing as soon as possible."
http://www.guardian.co.uk/money/2010/aug/20/bank-of-mum-and-dad-bites-back