Rise of the ‘greyday' loans
Over 1.7 million grandparents and parents are being pushed into debt by ‘greyday loans'; the financial assistance they provide to their adult children and grandchildren, research from MoneySupermarket.com has found.
The comparison site found a quarter of grandparents of children over eighteen (24 per cent) are helping to support their grandchildren and as a result are being forced to use their savings, credit cards, overdrafts, and pay day loans to tide them over. A further 32 per cent of parents with children over eighteen are still being relied on as a source of financial assistance. The research found the main areas this financial assistance from parents and grandparents is used for is towards general cost of living (58 per cent and 41 per cent), funding education (34 per cent and 23 per cent) and helping with their debts (25 per cent and 14 per cent).
As a result of providing financial support, over 46 per cent of parents and grandparents of children over 18 who provide financial support had to use their savings; 14 per cent turned to their credit card to tide them over and 14 per cent have been pushed into using their overdraft. The research also found their financial goals have been impacted with 33 per cent saying they've not been able to save as much as they wanted and 18 per cent still have outstanding debt which they cannot pay off.
Parents and grandparents will need to consider how they will repay their debt, with their total amount of non mortgage debt currently held at an average of £3,513.
Kevin Mountford, head of banking at MoneySupermarket.com said: "Parents and grandparents have always traditionally provided financial support towards their children's life goals such as buying their first home or helping with a car purchase, but with the nation's wallets pushed to the limits, it is clear this support has grown significantly. Many parents and grandparents who provide monetary help are finding their own financial situation being pushed to the limit with many taking on additional debt or stopping saving to help their nearest and dearest. Taking out additional borrowing to support family members is an honourable thing to do but people need to consider how they will repay the debt and how this will impact their lifestyle, especially if they are in, or approaching retirement. The ability to consolidate those debts onto a loan or credit card could be limited especially when your income may drop.
"The research also demonstrates how many families are struggling with even just the basic general cost of living and coupled with a lack of pay increases this means many are unable to clear their debts. But there are ways people can make some cut backs and help to break the cycle of relying on financial support from family members. People should ensure they're not paying over the odds for major expenses like car and home insurance, energy and other household bills. Taking control of your financial situation through switching to the best deals using a price comparison website like MoneySupermarket.com could help with significant savings."