| Real Life Strategies for Building Wealth

bank of mum and dad

You may think that John and I are an ordinary couple, going around our everyday endeavours and trying to live life as best as we can. You’d be wrong: we have been a quasi-bank – or the bank of mum and dad – for well over a decade now.

You see, when our grown up sons graduated high school they lived at home; we supported them.

We continued to support grown-up children when they went to university. We didn’t manage to pay for everything but even what we managed to contribute minimised their student loans.

We did it without resentment or a second thought. We supported our grown up sons (in my case step-sons) just like my dad supported me through university.

Can you guess the main reason people support grown-children?

No, it isn’t because we have to (this is for my readers who are on the receiving end of the bank of mum and dad).

It isn’t because we molly-coddle our middle-class children (this is for my readers who are at the giving end of the bank of mum and dad).

I believe it is because, as parents, it is our most base desire to see them succeed; and being happy.

What troubles me is that our grown-up sons are in their early 30s now, well out of university, working and…

…we are still supporting them. No it isn’t a regular arrangement. Still, the ad-hoc muted cried for money happen often enough. There is also my fear that they don’t eat enough (or well), that what they wear mostly looks like the rejects of a tinker, that…

Well, you get it.

My fears are not without foundation. Yes, both sons work. But they are by far not well paid. Our middle son is in retail and he, even in his new job with one of the last decent employers left in the UK, is on 15 hours per week contract. This, at minimum wage, doesn’t go far.

In brief, we have to support our grown-up sons financially so they can survive. How about thriving? How about getting out of renting and not having to choose between food and heat (people faced with this choice often choose drink and cigarettes, anyway).

More worryingly, it looks like we are not alone.

According to the BBC the bank of mum and dad help finance 25% of all mortgages in the UK at the moment. The average amount that parents contribute is £17,500 per child.

A separate study found that two in five baby boomers – these are the people who have children in their 30s now – expect to have to help their children get on the property ladder; one in four expect to have to help their children with their rent; and one in three, plan to cover the cost of their children living at home.

(Note: This research was supported by ziffit.com and they polled 2040 people across the UK. I have not seem the detailed methodology of the study but thought its findings interesting.)

Now this is scary.

For the parents who have to support their grown-up children, it is really bad news because this messes up big time with their retirement. This is affecting us, parents, in at least three ways:

#1. We are using money we would otherwise be putting away in pension accounts to keep our grown-up children;

#2. We are the generation living through immense changes in labour markets (fewer, very different jobs) and the breakdown of the social security system.

#3. We are sacrificing the savings and pension pots we have (apparently in London, half of the household net wealth of families, excluding housing, is going towards helping their offspring get on the housing ladder).

 It is not good news for the grown-up children we support either. You see, I believe that there comes a day when people have to become independent and start their own life. I know, that when our grown-up sons lived with us they didn’t have a life.

Worst of all, the contract between children and parents that existed for millennia is broken. It used to be that generation live together, they look out for each other and when the time comes, after each other. This time is long gone.

We help our grown-up children financially thus making our lot in old age much, much harder.

And here is the problem:

We support our grown-up children hurting our retirement and, eventually, starting to resent it.

Our children accept our financial help – they mostly believe that they don’t have a choice, really – thus never becoming properly independent and, eventually, they start to resent it.

Resentment breeds conflict and unhappiness.

For the life of me, I cannot find my way through this ‘dance’ of generations. I just hope that it is not going to turn into a battle!

Do you help your grown-up offspring? Or are you the ones who get help? How do you feel about it?

photo credit: Sumatran tiger cubs via photopin (license)