Kids support recession hit parents

Almost one in ten (8% with living parents/grandparents) adults have given or leant an average of £8,250 to their parents, according to the fourth annual Scottish Widows Savings and Investment Report. Adult children had to dig deeper last year than in 2008 to finance the effects of recession on their parents, as the average has increased from £6,500 in 2008.

The Scottish Widows Savings and Investment report revealed that adult children/grandchildren have borrowed over £13,000 (of with children 16+) from their parents, however parents are now having to go back to their children to ‘sap back' the money they may have previously given. Parents are now ‘sapping back' a total of £16.35billion from their children. In 2008 the average children's handout to their parents was over £6,500 making a total ‘sap back' figure of £11 billion.

Of those parents who have borrowed money from their adult children, most have done so in the last 12 months (42%), over a third (37%) said they used the handout to pay off debt, and worryingly a third (33%) have used the money for spending money/living expenses, a significant increase from 14% in 2008. 16% needed the money for a house purchase or deposit.

Iain McGowan, savings expert at Scottish Widows comments: "Parents are feeling the pinch, and therefore the Bank of Mum and Dad has decided to call in its debts and sap more money than ever from their children. In many cases, these parents leant money to their children earlier in their lives, which has left them out of pocket and needing to reclaim some of it. The fact that over a third of parents are using these cash handouts to pay off debt and a third for day to day living expenses demonstrates just how crucial this help can be. Indeed it is likely more parents will have to ask their kids for money in the future, particularly parents who are near to retirement and are struggling to put enough money aside."

The research has shown that grown-up children are also leaving themselves exposed by handing out money to their parents; 28% of those who had given money to parents had to dip into their savings and investments in order to give their parents money, and the ‘sapping' may not stop there. 35% of those that gave money to their parents believe they will have to give or lend their parents more money in the future. The average amount they believe they will have to give in the future is £2,024.

Kids are still 'quids in'

On balance though, adult children are still ‘quids in' as they have been given substantially more than they have given back. Scottish Widows revealed adult children/grandchildren are ‘sapping' their parents' savings and investments by an average of £13,660 (of with children 16+). This enormous figure is fuelling the need for parents to go back to their children, and ask back for the money they had previously lent.

Iain McGowan continues "At a time when most people are tightening their purse strings, families have to resort to helping each other out, and this is likely to become ever more prevalent. The amount of money given by parents to their children is huge, to the extent that the overall ‘sap fund' of children from their parents' savings is well in excess of £60 billion. So it's no surprise that significant holes are left in parents' finances and these will need to be filled in somehow, whether by sapping funds back from their children or by other means. This reinforces the need for parents and children to plan their finances and start preparing as soon as possible."