Why the 'Bank of Mum and Dad' is the ninth biggest lender in the UK - Sarah Coles

The HL Savings & Resilience Barometer looks at our financial resilience in a huge number of areas, from whether we have enough savings, to how much cash we have left over at the end of the month, and whether we’re on track for a moderate retirement income. In every area apart from debt, those whose parents were in a better financial position when they were growing up tend to be more resilient now.

The barometer doesn’t measure parental income while you were growing up, it uses proxies for wealth, like what level of education they reached, whether they were employed or not, and whether they owned or rented. Those whose parents owned their own home are far more likely to be financially resilient. Some 50% of them now own a property, compared to 19% of those whose parents rented. Having parents who worked when you were growing up also makes a major difference. A working Mum means you’re more likely to have enough savings (68% vs 41%), surplus income (35% vs 23%) and to own a home of your own (39% vs 19%). A working Dad means you’re more likely to be on track for a moderate income in retirement (47% vs 24%).

A huge element of this comes down to the fact that wealthier parents are more likely to be able to afford to pass money on. This includes offering cash to help their offspring onto the property ladder, which is what the Bank of Mum and Dad is best known for, but there are a myriad of ways they financially support their kids.

Some will set up a Junior ISA to provide a nest egg at 18, which might help finance further education, or otherwise give them a head start in adult life. They may also have separate savings and investment pots for specific things their children may need in early adulthood. And some will even pay into pensions for their children, to provide an enormous boost to their retirement savings.

This is all well and good if you have time to save up, and space in your budget for it. If you’ve run out of either, the good news is that the Bank of Mum and Dad can improve their offspring’s financial resilience without handing over any money.

If your parents own their own property, you’re more likely to consider this to be normality, so you prioritise home ownership and are more prepared to live with the inevitable compromises. Similarly, just by staying at school a bit longer, or going to university, it means statistically your children will be more financially resilient. Of course, some of this is the fact that higher levels of education on average tend to mean higher incomes. However, those whose parents remained in education for longer may also be able to offer more academic support growing up or simply have demonstrated to their kids that further education is an achievable goal.

For some people, all of this is incredibly frustrating, because despite an increasingly super-human effort to support your family, statistically your children are set to be less financially resilient as adults because of aspects of your life you have little or no control over. If you can’t work, or you’re on a low income, if you rent, or left school at 16, it’s spectacularly unfair that this should somehow pass down to your children’s finances.

The good news is that some parents have found ways to help close the gap, which may be worth considering. If supporting school work is difficult, talk to the school to see what they offer. Over the years I’ve been to loads of workshops at my kids’ school – a bog standard comprehensive - from an introduction to how they teach maths now, to techniques to support revision. They’re always hugely keen for parental help, and they’re there to support you.

If your kids then go onto further education and you’re not in a position to finance their studies, then in addition to student loans, it’s worth exploring whether there are other grants or scholarships they might be eligible for. There’s a great resource on the scholarship hub Helping you find UK scholarships | The Scholarship Hub. And don’t think your kids have to be geniuses to qualify: there are all sorts of scholarships available, including some for those on low incomes, some for those who are the first in their family to go to university, and several specifically for people from Yorkshire and the Humber.

And if you want to help them get a leg-up onto the property ladder, regardless of whether you own a home yourself, you can let them know about the Lifetime ISA, which is available to anyone aged 18-39. They can pay in up to £4,000 a year and the government will top it up by 25% - so they could get another £1,000. Then, as long as they wait a year between opening the LISA and buying the property, they are a first-time buyer, and they want to buy a property worth £450,000 or less, they can use their bonus to accelerate their path to property ownership.

Of course, in the final analysis, there’s only so much you can do. Even if you do everything ‘right’, your kids will forge their own path. As the parent of a 16-year-old, I know I have to let him make his own mistakes, and can guarantee that he’ll make plenty of them. My role is largely going to be working out how to pick up the pieces if things don’t go entirely to plan.

Long term sickness

In the last three months there has been a record flow out of ‘economic inactivity’ and into employment – unwinding a good chunk of the rise in people leaving work during the pandemic. However, those who are in poor health are being left behind.

The number of people who aren’t working or looking for work because of long term sickness has hit a record high, according to the Office for National Statistics. It has suggested that working from home may have added to musculoskeletal problems, and that some of this may also be because of long covid. However, it also owes a great deal to the fact that people suffering from conditions that were exacerbated by lockdowns and gaps in care during the pandemic aren’t getting the care they need. According to the BMA, in March there were 7.3 million people waiting for NHS care – and they estimate it will take a year to clear the backlog.

The government is keen for as many people to return to work as possible – so employers can find the staff they need in a dwindling workforce. However, this can never be entirely successful until access to healthcare is improved, so that more people can recover or get help managing long term conditions.

SARAH COLESHead of Personal Finance and Podcast Host for Switch Your Money OnHargreaves Lansdown