Nearly one in three forced to borrow from family
With the average amount borrowed by individuals standing at £2,123 the collective family lending economy is now worth around £31bn.
Family Generations & Financial Pressures, the new report from Scottish Widows think tank the Centre for Modern Family, shows that 23% of family borrowers need this support just to cover day-to-day household costs.
And as well as borrowing from family members, more than a quarter (26%) of people have raided their savings in order to cope with higher living costs and the same percentage has cut back on saving for the future. Showing no improvement on 2012 levels, almost one in ten (8%) people were found to be skipping meals just to keep on top of household costs. The same number were also selling valuables in order to get by.
Carolyn Fairbairn, Chair of the Centre for the Modern Family, said: “This research highlights not only the scale of the financial support families are providing each other, but also how the modern family dynamics are changing.
“We know that the family lending economy is now worth over £30 billion and so should the industry be doing more to develop innovative products, which allow families as a whole can contribute to, such as mortgages and ISAs?
“More widely, with household costs hitting certain family generations hard, is there scope for benefits reform to provide further support for working families struggling with household bills?
“With the Centre for the Modern Family we want to try and better understand how the different family generations are adapting in the post-recession era It is time this debate is opened by the nation and the industry to identify ways to help families across the generations be financially secure.”
Identifying eight different generations within the modern family, the report finds that rising household costs are still the biggest and most immediate pinch point for UK families across the generational spectrum, according to 41% of adults, over taking long-term goals such as mortgage repayments (26%) or paying off debt (10%).
Of the family generations, grandparents and parents of children under 18, are the groups being disproportionately squeezed. One in three grandparents who are providing childcare for family members has spent their savings to keep up with day-to-day spending.
A third of parents with children under 18 have had to cut down on vital living costs, such as groceries, to cover household spending, compared to one in four overall, and one in five parents of children under 18 has taken out a loan, spent on credit cards and gone overdrawn, double the average of one in ten for the total population.
Family financial support
The report finds that the generations are pulling together to help each other out financially in the post-recessionary climate.
Parents and grandparents were found to be the most generous lenders, with 39% of parents with adult children living at home and 36% of empty nesters having lent to their children. More than a third (37%) of grandparent child carers have also lent money to their children.
Single renters are the most likely to have borrowed from the Bank of Mum and Dad, with 43% having done so. This is compared to just over one in four (27%) ‘boomerang kids’ – adults under the age of 34 living back at home with their parents.
Despite high levels of intergenerational lending and borrowing, only one in ten family lenders said that they resented having to lend money to family members, with over half (55%) saying they were pleased to do it. This rises to 63% among parents with adult children still living at home. One in four family lenders never expect to get back the money they have loaned, and one in five family carers and grandparents say they expected to have to lend money to family members and budgeted accordingly.