Supporting Grown Children Affects Savings

Parents across the United Kingdom are having to use their savings to financially support their grown children, a recent study has found and this is affecting parents’ savings.

With the cost of living constantly increasing, many who have already moved away from their childhood homes have to ask for their parents’ help when faced with paying off debts and bills. However, the majority of parents feel they need to support their children if they are facing financial difficulties due to the love they have towards them.

A survey conducted by Fidelity Personal Investments has found that the average age of grown children still receiving financial support stands at 26.39, with Scotland having the eldest average age of over 29. More worryingly from the data is that over 10% of those surveyed are still aiding children over the age of 40, strongly highlighting the issues involved in living independently.

Through combining all of the costs, the average amount parents are taking from their savings and pensions to help their children is £23,059. Yet some 3% of those asked have contributed over £150,000 towards financially stabilising their non-resident children.

The financial strain of this support is evident on these parents, with almost half of those asked stating they now have fewer savings than before and 12% have had to delay their retirement just to help cover costs. In comparison to many parents’ youth, 70% of children are still seeking additional finance support, against 53% back in the 1970s. 4% of those asked even went to the lengths of re-mortgaging their own home to help support their grown children.

Associate Investment Director for Fidelity Personal Investing Maike Currie stated:

“These figures might come as a shock to many, but considering that young adults have borne the brunt of the financial crisis, it is not surprising that many are still reliant on support from their parents”

“Many may have entered the job market during the credit crunch and as a consequence are still struggling to get ahead. They face falling incomes, student debt, poor employment prospects and skyrocketing property prices.”

One of the main areas where grown children are seeking help is trying to get onto the property ladder. Despite the recent dip in prices on the market, first time buyers are struggling to put together a large enough deposit, as well as save money for mortgage payments. To ensure their children can get onto, and then survive on the property ladder, parents are paying out on average over £1,000.

The average house price in the year from October 2013-14 rose to £271,000 across the United Kingdom, with the first time buyers paying £208,000 to get onto the property ladder. However, England currently has the highest national average house price standing at £283,000, in comparison to Scotland (£194,000), Wales (£172,000) and as little as £134,000 in Northern Ireland. The cheaper prices within Northern Ireland have benefitted parents, as they are not having to support their child’s house deposit as much as in the other areas of the United Kingdom.

Parents in the country are paying out around £500 on average towards a house deposit, vastly less than the costs of over £1300 for parents in the South West and North West of England. The cheaper house prices have also financially helped parents in Wales and Scotland, who are putting around £740 and £900 towards their grown child’s first home.

Covering costs for deposits is not the only area in which grown children need financial support from their parents when purchasing their first home. With many buyers opting for a flexible mortgage option, there is room for interest rates to fluctuate and can leave the grown children need to ask for money to help with the payments. The interior costs of a home can also lead to mass expenditures, as the property may need a new boiler, kitchen or just decorating – a costs which may not have been planned for by the first time buyer.

Of the parents who participated in the survey, 33% of their grown children had left home in the last three, yet the highest age category still receiving support was 30-39, suggesting how those moving out straight away are looking for rentals, whereas the elder children are looking to get onto the property ladder and need support.

Yet it is not just housing costs where parents are helping, with grown children having support for areas such as credit card bills, transport costs and paying back university fees.

The trend of graduates struggling financially is set to worsen in coming years due to the hike in tuition fees. Introduced by the Coalition government in 2011, universities are now able to students charge up to £9000 per year signalling a massive increase compared to the new Labour prices of around £3000 and from when attaining a higher education was free of charge. Although those who studied before 2004 still had to obtain a maintenance loan, their level debt is expected to be no-where near that of the current crop of undergraduates

As grown children struggle to find their financial footing in modern day society, parents are having to use their savings and pension funds to help keep them afloat. Despite the good nature of their actions, it is forcing parents into more drastic action, such as postponing their retirement and in some cases, re-mortgaging their homes.

Currie comments on parents using their personal fund and savings to help their children by saying:

“Every parent wants to lend their child a helping hand, but with life expectancy increasing at a rapid rate, you will probably live for longer than you think and, as such, your income will need to last longer. Ultimately, helping adult children should fit around your personal financial circumstances – never jeopardise your own retirement or savings – your child may be fine contending with student or property debt but less so with supporting you in retirement.”

The age of parents having to support their grown children is upon as more adults struggle to meet the financial demands of modem day living.