The “Bank of Mum and Dad” is a recent term coined to reflect how more and more parents are supplementing their children’s income,often with significant amounts of money.
In May 2017 The Guardian reported* that the bank of mum and dad is predicted to lend a massive £6.5 billion to their offspring this year to help them get on the property ladder as home prices continue to be out of the reach of first-time buyers.
On average, mums and dads are giving an average of £21,600 to their kids, the majority to people under 30 years of age.
Many other parents, who perhaps can’t afford to be so generous, are still giving smaller, regular handouts to their children who are in their 30’s and beyond to help with the high cost of childcare, day-to-day bills and even leisure activities. And in 2016, over 50% of 21 year olds still lived with their parents, and by the age of 29, 12% were still living at home**.
But when is enough, enough for the bank of mum and dad? How can you be sure that your children are using your money for the right reasons, and they’re not just coming to you for a handout when they want something new?
Here are 10 signs which indicate your kids could be taking advantage of your generosity.
1. Parental Loan
If you agreed to loan your child a significant amount of money, with the expectation that they would repay you in installments (with or without interest), are they failing to make those payments as promised?
2. Cost Considerations
When you’re out shopping with your child, do they weigh up the cost of things when it comes to purchasing something, or does that not seem to be a consideration at all?
3. Material Things
Does your child have the latest iPhone, a range of techie gadgets, a new car, new home furnishings, but still complains they don’t have enough money?
4. Holidays
Does your child expect to have at least one holiday abroad each year and then comes to you for additional cash to pay their bills?
5. Credit Cards
Does your child purchase everything on a credit card, then come running to you for help when they get themselves into credit card debt?
6. Home Lovers
Does your adult child still live at home, treat it like a hotel and gets annoyed when you ask them to contribute to the household bills?
7. Education of Grandchildren
Does your child expect you to help with private education of your grandchildren and couldn’t possibly consider sending their own kids to a state school?
8. Gifts for the Grandchildren
Do you find your grandchildren asking you to buy them a new toy as they know mummy and daddy can’t afford it?
9. Property
Does your child suggest you downsize your property and give them their “inheritance” now?
10. Moaning
Does your child continually moan about not being able to make ends meet in an attempt to make you feel sorry for them and cough up more cash?
The bank of mum and dad can be a great thing – if managed well and so long as you have the funds to support your kids. It can’t be denied that getting on the property ladder is very difficult for first time buyers. If you wish to help your children with a loan, then that is your choice (although a formal loan document must be drawn up and signed by both parties).
However there are too many grown up kids who expect to have all the good things in life – a nice car, a nice mobile phone, a wide screen TV, new clothes, fancy haircuts and lots of nights out with friends – and don’t see why they should have to go without. Hence they turn to you when their income doesn’t cover their expenditure, or when they have maxed out their credit cards.
If your children are showing some or all of the 10 signs above, it’s probable that you are being taken advantage of, and it’s time to take action. Either shut down the bank of mum and dad completely, or rewrite your bank’s terms and conditions – ultimately you are in charge of your own wealth, and you need to educate your children to that they start to take charge of theirs.
*https://www.theguardian.com/business/2017/may/02/bank-of-mum-and-dad-lend-65bn-property-market
**https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/datasets/youngadultslivingwiththeirparents
