Bank Of Mum And Dad Gets Returns

Parents often help their children get into the housing market. But they're less inclined these days to just give their money away.

A few years ago I wrote an article suggesting that if parents were going to help their children get on the property ladder, they should at least 'lend' them the money rather than just giving it to them.

As I'm sure you know -- and maybe you've even been there, done that etc -- there's been a trend in recent years for parents to remortgage their own homes in order to provide their kids with the necessary deposit. I've never been sure that this is a sensible thing to do when people in their 40s and 50s should probably be concentrating on funding their own retirement rather than giving away money that they may one day desperately need.

Of course it's a different matter if you can truly afford it but a recent survey by Scottish Widows has revealed that the number of graduates using the Bank of Mum and Dad to fund a property purchase has doubled in the last 10 years. Apparently the average amount children get from their parents is £12,000 and Scottish Widows is warning that parents should beware of leaving themselves short of funds.

Parents seem to have already taken this on board because while more parents are helping their children financially, fewer of them are willing to just give their money away. The number of graduates receiving pure gifts of money from their parents has fallen from 38% ten years ago to 32% in 2006 so parents are clearly expecting to be paid back at some point.

Not surprisingly though the Bank of Mum & Dad is less like a real bank in that some don't charge interest or even set a deadline for when the loan is to be repaid.

However, it's still important for parents to consider the impact on their own finances before rushing to help their children to get on the property ladder. While it's admirable to want to help your child to get established in a home of their own, don't do it at the expense of your own retirement plans. And remember that there are alternative options available such as those which allow parents to act merely as mortgage guarantors for their children.