The High Price Of Parenthood

With most parents providing financial support to their adult children, here's how kids are becoming a burden for life.

According to new research by retirement specialist GE Life*, the UK is becoming a nation of 'children for life', with many parents financially subsidising their children well into adulthood.

Last November, GE Life interviewed nearly seven hundred people aged over fifty to find out how much financial support they provide to their offspring. Two-thirds (66%) of this group received no monetary help from their parents when they were in their twenties. However, although this post-war generation stood firmly on its own two feet, the same cannot be said for its children!

Indeed, almost two in three parents (64%) currently help their grown-up children because their offspring 'need their assistance' or because they feel that it is their 'responsibility as a parent'. This financial support continues even when these children go on to have children of their own. So, post-war austerity and personal responsibility have given way to what might be called the 'sponger generation'!

For the record, GE Life estimates that this financial helping hand across generations adds up to an incredible £185 billion. Notable gifts include the following:

• On average, parents pay out almost £7,700 on three years of university fees for their children -- a total of £61 billion.
  
  
• More than a quarter have helped their child get on the property ladder, spending an average of £5,800 each, or £32 billion altogether.
  
  
• Three in seven parents (43%) cough up for weddings, with the average matrimonial contribution being close to £2,900, for a total of £24 billion.
  
  
• Half of parents have paid an average of over £1,850 towards their child's first car, making a total of £18 billion.

To be frank, although I can fully understand the desire of parents to fund their child's further education, I see these other gifts as overindulgence bordering on mollycoddling! After all, if you're mature enough to decide to marry, then surely you should take responsibility for paying for your big day yourself, without parental assistance?

I may be in the minority in this respect, because I have many friends in their twenties, thirties and even forties who are happy to accept habitual contributions from their folks. Then again, there's a lot to be said for 'keeping it in the family', at least as far as money is concerned. After all, borrowing from the 'Bank of Mum and Dad' is likely to be hugely cheaper than going cap in hand to a bank or other lender!

Nevertheless, I have some sympathy for today's twentysomethings, who really do have it tough in some ways. For example, with house prices rising for eleven years in a row, millions of potential first-time buyers have been priced off the first rung of the property ladder. Even those who have been sensible enough to save up for a deposit have been thwarted -- largely because house-price increases have exceeded most twentysomethings' ability to save hard enough to keep pace!

On another note, as well as living with their parents longer, young adults are being helped out by their parents on a daily basis, with three in ten (30%) of the over-fifties admitting that they pay some or all of their children's basic living costs. Furthermore, the helping hand doesn't stop with parents, as a fifth (20%) of grandparents also pay out regularly to their grandchildren.

Clearly, there's a danger that parents are putting their own financial future at risk by being too generous with handouts. In particular, it makes little sense to feather your child's nest while neglecting your own retirement provision. After all, what kind of sons and daughters would be happy to enjoy a higher standard of living while their pensioner parents repeatedly make sacrifices on their behalf?

Indeed, I would argue that parental duty means much more than just handing over money on a whim, or as and when your children demand it. Sensible parents must teach their children about budgeting, borrowing and saving at an early age, in order to provide their progeny with vital life skills in adulthood.

Personally, I have no intention of leaving myself out of pocket in later life in order to pamper my children. Instead, I've 'done the work upfront' by making investments now that will help my children to cope with the financial demands of early adulthood.

I'm not alone in this respect: GE Life found that close to half (49%) of the over-fifties have already set aside cash for their children, with almost a quarter (24%) claiming that they plan to do so. Also, nearly five in six older parents (84%) say they plan to leave their property to their children, which will massively boost the transfer of wealth across generations.

Beyond this, I don't expect my son and daughter to be a financial burden once they hit their early twenties. In an effort to teach them to fend for themselves, I'm preparing the ground early. For instance, when I hand over my son's pocket money, I always say, "Remember, you can only spend it once, so think carefully before blowing it all!"

Finally, should parents cut those apron strings and leave their adult children to fend for themselves, or should they do all they can to smooth the way? You can have your say here.

(*By the way, GE Life no longer has anything to do with global giant General Electric, which sold this business to Swiss Re in October 2006. The GE Life brand name will change later this year.)

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