The rise of the Bank of Mum and Dad (BOMAD) is stoking family tension with parents and adult children admitting that providing financial help is not without its risks, new research from the UK’s leading independent equity release adviser Key shows.
Its nationwide study found 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%) say they decided how much financial help to give based on how well-off their children are.
BOMAD customers themselves admit there are problems – 25% of under-40s say the financial handouts they’ve received have caused friction with siblings and three out of four (75%) admit to feeling guilty about the cash they’ve received.
Industry estimates show BOMAD is expected to pay out around £5.8 billion this year for housing transactions alone with Key’s research showing BOMAD is also helping with a range of other financial issues. 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 warns 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.
The intergenerational divide
Key’s research found around two out of three (66%) of homeowners aged 55-plus believe their children would be happy for them to give more money to siblings if they need. However, 26% say they are too worried about disputes to discuss money with their children.
The increase in financing by BOMAD 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 believe 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% say they may have to provide financial support to their own elderly parents.