There was an interesting article in The Times recently, explaining that the Baby Boomer generation has given more than £10bn to their children and grandchildren this year to help them onto the property ladder.
Thank you, Bank of Mum and Dad!
According to the research reported in the article, the over-55s are giving their children and grandchildren an average of £14,064 each, more than £10bn in total, to help them buy property.
A combination of rising house prices and low wages is apparently resulting in the Baby Boomer generation feeling (at least partially) responsible for helping adult children buy their first home.
In addition this assistance with house buying, Baby Boomers have spent over £2.bn to pay for weddings, £2.4bn on new cars and £590m on establishing new businesses.
During 2014, the Bank of Mum and Dad has paid out an estimated £26.7bn.
The source of these funds makes quite interesting reading.
Existing savings, passing on an inheritance to the next generation or accessing pension funds are the most popular sources of wealth, representing the source of the money for more than half of over-55s who made gifts.
It was also interesting to note that 14% of Baby Boomers deferred their retirement in order to give money to children or grandchildren,
12% went as far as taking on extra work to get hold of the necessary funds.
Many of the Baby Boomer clients we work with feel a moral obligation to act as the Bank of Mum and Dad, especially to help their children up onto the property ladder.
House prices in this part of the world make the prospect of buying your first home quite unlikely, unless you have some form of parental assistance.
An important part of our role as Financial Planners is helping our clients a) understand how much they can afford to give to children, without the risk of running out of money during their own lifetimes, and b) selecting the most appropriate source of funds for these gifts.
As adult children continue to say thank you to the Bank of Mum and Dad, families are engaging with Financial Planners to make sure these gifts are made in a sensible and sustainable way.
