The truth about family money

It’s not all about the Bank of Mum and Dad

The fact that a quarter of under-34s still living at home made primetime national news should tell you a lot.

First, the property market is shot. We knew that.

Second, there are clearly a lot of overgrown kids out there whose folks still iron their pants.

Third, the matter of money is now more of a family affair than ever.

Artful lodgers

Yes, there are the usual figures around the Bank of Mum and Dad bailing out their kids well past early adulthood.

The Office for National Statistics revealed this week 3.4 million 20-34 year olds are still living with their parents, including a third of all men under 34. Adult children living at home cost parents an average of £1,780 a year in added household expenses according to Fidelity International.

“The challenge is that financially supporting your children has no definite end date, and not everyone has an infinite source of money to draw on,” says Tom Stevenson, investment director for personal investing at Fidelity International.

“However, being aware of the commitment and factoring children into your financial life plans, no matter their age, can help you feel better prepared to cope with what might be around the corner.”

Sibling support

But it turns out the Bank of Mum and Dad works both ways.

Almost half of millennials and more than half of Generation Z-ers have paid into the Bank of Mum and Dad. The Bank of Bro and Sis is on the rise too, with a similar proportion of young adults providing financial support to siblings.

Providing more support to their parents than any other age group, 23- to 38-year-olds have given £1,161 to family members over the last 12 months to help with their day-to-day finances, according to data from M&S Bank, compared with £871 from 16- to 22-year-olds, £756 from 39- to 54-year-olds, £498 from 55- to 73-year-olds and £563 from the over-74s.

“While millennials or Gen Z-ers may be boomeranging back to live in the family home at some stage in their adult lives, with parents often supporting their children to get a foot on the property ladder, this support is not a one-way street, with many younger generations also helping parents and other family members,” says Paul Stokes, head of products at M&S Bank.

“It also works across generations, with siblings now more commonly purchasing property together.

“Our findings contrast with the common narrative that financial support in families only flows one way, or that it’s all about the money, with many keen to hear about the financial learnings of both older and younger family members.”

“The research clearly demonstrates that as lifestyles and family models evolve, so do financial realities among family members,” Kay Neufeld, head of macroeconomics at the Centre for Economics and Business Research (Cebr), which authored the research report, said.

“While parent-to-child support continues to play an important role, the report shows that there are also significant financial flows from children to parents as well as between siblings. From the cost of care and housing to simply helping out with ongoing bills, many older family members are grateful for any financial support they receive.

“When times get tough, however, more traditional family roles prevail with the research showing that people are four times more likely to rely on their parents during financial hardship than on their children.”

The problem is, when it comes to those tough times and the informal intra-family loans that follow, we’re just not that great at paying it back.

Two-thirds of Britons have had to borrow money in the past 12 months, including 15 per cent who borrow from a partner, 14 per cent who borrow from parents and 12 per cent from siblings, compared with 20 per cent who go to a bank for money, research from Likely Loans suggests.

Unfortunately, while 99 per cent pay back official loans, almost a quarter of family and friends never see their money – an average of £125 per loan – in full again.