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Cost-of-living crisis: families turn to the Bank of Mum and Dad

Mum hugging her grown-up daughter as they sit together on a sofa

Soaring costs for energy, food and fuel are hitting household budgets -- and for some families, this is increasing their dependence on the Bank of Mum and Dad.

It follows on from an extended period of support given during the pandemic, and new research from Saga Equity Release shows that many parents believe the next generation will need even more financial help to get through this latest period of uncertainty.

In October 2020, 1 in 5 parents said they were helping their adult children financially. Almost two years on, this has increased with 1 in 4 saying they will be providing financial support to their adult children over the coming months. A similar proportion expect to still be providing support in a year's time.

In fact, due to rising bills, a lack of savings, and increasing rent or mortgage payments, almost two-thirds (64%) of parents surveyed expect the current cost-of-living crisis to have a greater impact on their adult children's finances than Covid-19.

Of course, this is having a knock-on effect on the savings and investments of those parents who are helping their grown-up children.

The events of the last two years have caused many over-50s to take another look at their inheritance plans and think more flexibly to support their families, the research found.

  • 1 in 4 (24%) say the cost-of-living crisis has changed how they plan to share their estate with their family -- rising from 21% due to the pandemic.
  • 12% of over-50s gifted away money during the Covid-19 pandemic.
  • 15% now expect they will do so at some point during the current cost-of-living crisis -- an average of 9% of their estate.
  • Over a third (34%) also say they are now more open to different types of inheritance, with the same proportion wanting to see their children benefit from it before they die.

The study also suggests that 5% of parents aged over 50 are now considering equity release, rising to 13% for those aged over 80. The main reasons given were to release funds to support family, and as a result of the cost-of-living crisis.

"The last two years have been unparalleled in terms of the impact on our finances, with further challenges on the horizon," commented Alex Edmans, head of retirement at Saga Personal Finance.

"The Bank of Mum and Dad was a critical lifeline for many people during the Covid-19 pandemic, and our research points to a growing dependence on family support as inflation continues.

"As dipping into savings or investments becomes less realistic in the cost-of-living crisis, more parents are now considering different approaches to inheritance -- be that fast-forwarding plans, gifting sums of money or releasing equity from their homes. We could see permanent changes to attitudes towards inheritance as a result."

Posted by Fidelius on June 20th 2022

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