The bank of mum and dad may not be the answer

Strapped for cash Brits who borrow money from their parents to make ends meet in the run up to the February pay day will most probably leave their mum and dad out of pocket by not paying back the full amount.

New research from the Money Shop, found almost three in five (58%) people have borrowed money from their parents in the last year with £275 the average amount borrowed.

One in four (23%) ask the Bank of Mum and Dad for help to avoid going beyond their overdraft, however, just two in five (41%) pay back the full amount. This has led to one in 10 (7%) having a family argument.

Money Shop conducted the survey to coincide with the launch of its newly improved Cash ‘til Payday product which allows consumers close to their overdraft limit to borrow up to £250 cash at a cheaper rate than going over their authorised limit.

Paul Mildenstein, Money Shop’s managing director, said: “Coming towards the end of the month when money is short can be difficult, especially when something crops up that you need money for. January is the worst month of all as many were paid before the festive break and won’t get paid again until February.

“People usually have two choices – go over their authorised overdraft limit and face the excessive charges banks impose or consult the Bank of Mum and Dad. However, as borrowing money from parents can lead to family arguments we’ve launched our newly improved Cash ‘til Payday product. It can provide a much needed cash injection towards the end of a month which is considerably cheaper than a bank’s unauthorised overdraft rates.”

Overdraft charges are currently under investigation from the Office of Fair Trading (OFT) to see if fees for unauthorised overdrafts are fair. Currently some banks charge as much as £30 plus interest for going just £1 overdrawn.

According to Money Shop’s research, one in three (29%) people regularly ask their parents for help in the days leading up to payday. A similar number (31%) think it is quicker to speak to their parents for financial help than try to negotiate with their bank.

Nearly half (42%) of people wish they didn’t have to borrow money from the Bank of Mum and Dad, with a further one in eight (13%) thinking their parents are growing tired of the regular requests for money.

Paul Mildenstein added: “The final days up to payday can be a real nightmare especially if a friend invites you on a night out or your car breaks down and needs repairing. Even if you’ve got an authorised overdraft but reached the limit, there are sometimes occasions when you just need money.

“Rather than queuing in a bank for ages to negotiate an overdraft extension or bothering your parents for money, our advice is come to Money Shop. We’ll lend you the money and you won’t need to pay us back for 30 days.”

According to Money Shop’s research the top 10 things people are most likely to borrow money from their parents for are:

Short of money in the run up to payday, 29%
To pay for an unexpected emergency, 28%
To pay for a night out with friends, 21%
To pay for food before payday, 19%
To pay rent of mortgage, 18%
Buy some new clothes, 18%
To pay off a utility bill, 16%
Buy petrol in the run-up to pay day, 15%
To help with a deposit for a house, 7%
To buy concert tickets, 6%

Paul Mildenstein said: “Trying not to go beyond your overdraft limit can be tricky. More often than not you’ll get a call from your friends wanting a night out which you can’t really afford or an untimely bill will come through your door.

“With fewer Brits taking out savings accounts, and living for today rather than tomorrow, the need for quick access to cash is more important for many consumers. And with banks continuing to charge customers excessive amounts for going the slightest bit over their limit, we expect our Cash ‘til Payday product to prove very popular.”