"In many cases this financial support ends up being gifts from Mum and Dad rather than the loans from the Bank of Mum and Dad they start out as."
This is despite being owed £12,700 on average, with more than one in 10 of the Bank of Mum and Dad’s loans for figures of more than £20,000.
However, the potential for significant financial loss from written-off loans doesn’t appear to deter them. More than two thirds (68%) of the more than 1,000 parents interviewed have already loaned money to their families, or have definite plans to do so in the future, while the remaining (32%) all hope to be in a position to act as their children’s preferred lender some time in the future.
Of those parents who are considering lending to their offspring in the future, many are also unsure they will get the money back – nearly two fifths (37%) think it is unlikely they will be repaid, while only just over a quarter (28%) expect to be repaid eventually if they are called on as a lender.
Stan Russell, retirement income expert at Prudential, said: “As a parent myself I completely understand that most of us who are in a position to do so would want to provide financial help to our children. But as our research shows, in many cases this financial support ends up being gifts from Mum and Dad rather than the loans from the Bank of Mum and Dad they start out as.
“These written-off loans risk making a long-term dent in the finances of parents, often at the stage in their lives when they would like their money to be invested for the future and working hard for them in a pension. If the choice is between providing loans to their children or continuing to contribute to a pension, many parents could benefit from a consultation with a professional financial adviser before making that decision.
“As many younger people struggle to get onto the housing ladder it has become widely accepted practice for parents to help out where they can, but children going to the Bank of Mum and Dad to help cover everyday living expenses is a worry. For many parents, repeated pay outs to their children could have a detrimental impact on their own long-term saving for retirement.”
