Julian Knight: The danger of driving the Bank of Mum and Dad and the Building Society of Gran and Grandad to the wall

You've no doubt heard of the bank of mum and dad but what about the building society of granny and grandad?

A new report by Friends Life (the new name for Friends Provident) highlights the trend of middle-income people in their thirties and forties, with families of their own, desperately turning to their parents for cash handouts to see them through the recession. It's not about buying a first home – aka bank of mum and dad – these middle-income middle-aged people already have one of those, it's more about trying to keep their heads above the financial water. Job loss is the most extreme example of situations that trigger the need to call in the cavalry, but the report reveals it can be as simple a matter as the rising cost of living.

This has long-term implications. The grandparents and their resources won't be there for ever, and the fact that so many families in their middle years are struggling means they are likely to miss out on the chance to accumulate wealth down the line. In previous generations, there has been a golden period in people's lives – normally in their fifties – when the kids have gone to university or out into the world of work, and the mortgage on the family home is either paid off or negligible. At the same time, a person has often reached the top of his or her career and earnings are at their peak. This has been when the real dash for retirement savings could be made and a cash pile built up.

What is worrying about this state of play is that these cries for help from the squeezed middle are coming at a time when interest rates are at never-to-be-repeated lows. What will happen when they have to rise?

As for the golden period, it's going to be open to fewer and fewer people. As highlighted by the Friends Life survey, debt is carrying on into the fifties and sixties. And some people on interest-only mortgages (see the feature above) may not even be preparing to pay back the outstanding capital, relying instead on supposed house-price growth which, in some parts of Britain, may not come back for a decade or more.

If the golden period disappears, this could be the last generation when the bank of mum and dad, or the building society of granny and grandad, is open for business.

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