The ‘Bank of Mum and Dad’ has long been known as a financial resource for children to access, whether the intention to pay back any monies loaned is there or not. This transactional process is now so common place, popular culture has even coined the acronym ‘BoMaD’ and integrated its use into today’s modern vocabulary.
But while this blasé use of language seems to make light of the situation, the BoMaD is a serious issue.
We all want the best for our families and in the current economic climate, this means parents or grandparents supporting younger generations financially, whatever stage of life they’re at.
This is largely down to younger people not having the same opportunities that the baby boomers had. Affordable housing, defined benefit pensions and free university education are a thing of the past, and the outlook for young people’s financial futures is uncertain.
This is where the Bank of Mum and Dad has been stepping in; relied upon to fund, or subsidise major life milestones, ranging from university fees to large purchases such as cars.
Significantly, reports in 2017 showed that 42% of parents are helping their children get a foot on the property ladder, providing over 298,000 mortgage deposits and contributing to buying homes worth a combined £75 billion.
The study by financial services group, Legal & General showed that the Bank of Mum and Dad typically pays £21,600 towards their first-time buyer children’s property. For many parents or grandparents in retirement, this kind of generous outlay may seem out of the question as they prepare to live off their pension fund. Or is it?
The Equity Release Council who safeguard customers who take out a plan recently found that releasing equity from your home is becoming a more viable option.
In fact, a record 37,000 households took out an equity plan in 2017- a 34% increase on 2016.
If you want to find out if Equity release could be an option for you then why not speak to one of our advisers today. They’d be happy to help.