Boomerang generation bleeds parents dry

Grown up offspring are still relying on Mum and Dad for cash handouts well into their adulthood. Far from being totally independent, many adult children are holding out the begging bowl and asking, “Please Mum and Dad, can I have some more?”

A new report from Scottish Widows reveals over 10 million adult children have ‘sapped’ their parents’ savings. Four in 10 (39%) parents have dipped into money, put by for themselves, in order to help their children out, either as a loan or gift. The average amount given by parents to their offspring is £12,300, making a total ‘Savings Sap’ of £55 billion - approximately six per cent of the total UK cash savings market.

The research also demonstrates an ever increasing Savings Sap over the past 15 years, implying that adult children may plunder the older generation even more in the future. £11 billion – or 20 per cent of the total Savings Sap amount – was given just in the past year alone.

Half (49%) of all parents that have already given money to their children are expecting to have to dig deeper into their pockets and shell out again in the future.

Three quarters of parents (76%) have given a substantial amount of money more than once.

Three in 10 parents are forking out a staggering five or more times.

It also seems that parents have completely resigned themselves to being continually sapped for money with half saying it’s what parents ‘have to do these days’. A further quarter of parents feel their children need it more than they do.

Unprepared parents suffering savings shortfall

Almost half of parents (45%) think they will not be able to top up their savings to the pre-plundered amount. A third of parents say that in order to try and restore their savings, they will have to cut back – on luxuries (20%) , but more worryingly, on day-to-day spending as well (13%). 16 per cent of parents had planned on using the money to fund their own retirement, or were saving for a rainy day.

Anne Young, savings expert at Scottish Widows comments: “Our research shows that parental responsibility no longer ends when your children reach adulthood but lasts for many years after that. Parents may be shocked to learn that their savings could be ‘sapped’ by about £12,000 after their children leave home. We recommend they try to prepare for the possibility of this happening by creating their own Savings Sap fund – but they might want to keep it secret from their children until they need to use it!”

Children are using their Savings Sap gifts for a number of reasons, the main one being a helping hand on to the property ladder:

House purchase/deposit (29%)
Car (23%)
Household/furnishings (15%)
Paying off debt (14%)
Living expenses (11%)
Education fees (6%)
Travelling (6%)

Merlin Stone, leading economist comments: “For over a decade, economists have been concerned about whether baby boomers, those born in the years immediately after the first world war and now mostly retired or entering retirement, have saved enough to fund their retirement. In general, the conclusion seems to be that they did, but now they face a financial Shirley Valentine situation, often following its physical version. For the same generation of children who came home to their parents to roost after university before departing to set up their own household are coming back with their hands out for help with the housing and furniture, car purchase and even holidays.

“And it looks like the trend is a rising one, for while 39% of those interviewed have given or lent substantial sums to their children or grandchildren, only 22% of those interviewed have received substantial money gifts or loans from their parents or grandparents. So the paradox is that while our society is getting richer, it is increasingly dependent on intergenerational gifts. And worryingly half of these gifts are associated with the investments needed just to get started in life.”

Anne Young continues: “Putting away the average Savings Sap of about £12,000 can seem a little scary but there are ways to save a little every month such as a direct debit into a tax beneficial ISA. And preparation for the future can never come too early, so parents of eligible children should always take advantage of the Government Child Trust Fund scheme and, where possible, top it up with additional amounts. By the time the child becomes an adult, there will be a nice nest egg to use for university education, or getting on the property ladder.”