Drop In Demand for Loans from Bank of Mum and Dad
With the banking industry’s reluctance to lend money over the past few years, it has fallen to many parents to help their children financially in order for them to get onto the property ladder.
compare prepaid cardsBut the idea of the ‘bank of mum and dad’ may not be as common as once thought, according to new research from a debt advice charity.
In fact, the data indicates that although many first-time homebuyers do receive help towards their deposits from their parents, young adults today don’t borrow as much money from friends and family as older generations.
The report, from the Debt Charity StepChange based in Leeds, has shown that last year those under 25 owed an average amount to friends and family of £1,761. In comparison, the 25 to 39 age group owed an average of £3,458 in informal loan debts.
Furthermore, the amount owed to friends and family by those aged 40 and over was even higher, with the 40 to 59 age group owing outstanding amounts of £4,341 to friends and family on average. People aged 60 and over did not fare much better, with average debts of £4,229.
External affairs director at the StepChange Debt Charity Delroy Corinaldi explained: "While large numbers of young adults rely on their parents to provide the funds for a deposit on their first home, they are a lot more financially self-reliant than the idea of a 'bank of mum and dad' suggests.
"If anything these figures show that young people are not as willing to rely on their parents financially as previously thought and are only seeking help from the 'bank of mum and dad' as a last resort when trying to buy their first home."
Not only do those under 25 seem to be borrowing the lowest amount of all age groups, but the average sum has gone down from £1,894 in 2009 to £1,761 in 2012.
One way to ensure your child grows up financially savvy is to introduce the use of prepaid cards. Since only what is loaded onto the card can be spent, this quickly teaches young people the importance of budgeting.