The rise of the Bank of Mum and Dad is leading to family tension with some adult children admitting that providing financial help is not without its risks, research from equity release adviser Key has found.
One quarter of under-40s who received help from The Bank of Mum and Dad said the financial handouts they’d received had caused friction with siblings and three quarters said they felt guilty about the cash they’ve received.
Will Hale, chief executive at Key said: “It’s natural for parents to want to help children and grandchildren but it is desperately sad if that comes with emotional costs on top of the financial costs.
“In an ideal world, the whole family should be involved in discussions about how much money is being paid out and in general the research shows most would be perfectly happy for siblings to receive more if they need the help more.
“But of course, we don’t live in an ideal world and in extreme cases Bank of Mum and Dad bust-ups can end up in court.
“We believe advice is key and families should wherever possible seek independent help whether it’s from financial advisers or lawyers.
“Our experience also indicates that the option of face-to-face advice can be important in getting all parties together to help everyone understand and agree on the approach.”
Nearly one in five over-55s (18%) have not told all their children exactly how much siblings have received while two out of five (41%) said they decided how much financial help to give based on how well-off their children are.
Industry estimates show the Bank of Mum and Dad is expected to pay out around £5.8bn this year for housing transactions alone.
Around 10% of homeowners aged 55-plus who expect to give money to help younger members of their families will pay for cars while 8% will put it towards paying for a wedding.
But Key warned that parents and children need to be clear from the outset if handouts are loans or gifts and urges both sides to seek independent advice if possible to avoid the risk of disputes ending in court.
Around two out of three (66%) of homeowners aged 55-plus believed their children would be happy for them to give more money to siblings if they need. However, 26% said they are too worried about disputes to discuss money with their children.
The increase in financing by Bank of Mum and Dad is not driven by children with 67% of under-40s who are renting agreeing that parents don’t have a duty to provide money. That said, four out of five believed the intergenerational wealth divide needs to be addressed urgently.
For some parents and their children it is not an issue with 16% of parents admitting they cannot afford to give any money while 22% said they may have to provide financial support to their own elderly parents.