New research from equity release adviser Key has revealed that the rise of the Bank of Mum and Dad (BOMAD) is exacerbating family tension with parents and adult children saying that providing financial help is not without its risks.
Its nationwide study found that 18% of over-55s have not told all their children exactly how much siblings have received while 41% say they decided how much financial help to give based on how well-off their children are.
BOMAD customers themselves admit there are problems – 25% of under-40s say the financial handouts they’ve received have caused friction with siblings and 75% admit to feeling guilty about the cash they’ve received.
Industry estimates show BOMAD is expected to pay out around £5.8 billion this year for housing transactions alone with Key’s research showing BOMAD is also helping with a range of other financial issues. Around 10% of homeowners aged 55-plus who expect to give money to help younger members of their families will pay for cars while 8% will put it towards paying for a wedding.
Key is warning that parents and children need to be clear from the outset if handouts are loans or gifts and urges both sides to seek independent advice if possible to avoid the risk of disputes ending in court.
Key’s research found 66% of of homeowners aged 55-plus believe their children would be happy for them to give more money to siblings if they need. However, 26% say they are too worried about disputes to discuss money with their children.
The increase in financing by BOMAD is not driven by children with 67% of under-40s who are renting agreeing that parents don’t have a duty to provide money. That said, four out of five believe the intergenerational wealth divide needs to be addressed urgently.
For some parents – and their children – it is not an issue with 16% of parents admitting they cannot afford to give any money while 22% say they may have to provide financial support to their own elderly parents.
Will Hale, CEO at Key, said: “It is natural for parents to want to help children and grandchildren, but it is desperately sad if that comes with emotional costs on top of the financial costs.
“In an ideal world, the whole family should be involved in discussions about how much money is being paid out and in general the research shows most would be perfectly happy for siblings to receive more if they need the help more.
“But of course, we don’t live in an ideal world and in extreme cases Bank of Mum and Dad bust-ups can end up in court. We believe advice is key and families should wherever possible seek independent help whether it’s from financial advisers or lawyers. Our experience also indicates that the option of face-to-face advice can be important in getting all parties together to help everyone understand and agree on the approach.”