Today's parents may be in their sixties before they stop bankrolling their children, which will have a nasty impact on their financial health!
According to new research from engage Mutual Assurance (part of Homeowners Friendly Society), today's young parents may find that their children are still financially reliant on them when mum and dad are in their mid-sixties!
Although today's young couples expect to be free from the financial ties of parenthood by the time they reach fifty, the reality is strikingly different. Indeed, thanks to these financial commitments lasting longer than anticipated, some British parents are forced to sacrifice lifetime ambitions (such as taking luxury holidays and buying second homes) in order to support their adult children.
engage Mutual Assurance's survey found that almost half (46%) of parents with children over 25 are still supporting them financially. The firm refers to these young adults as the BOMAD generation, because they're such a burden on the Bank of Mum and Dad. Indeed, parents aged 45 to 54 who are still supporting their children don't expect to gain financial freedom until the age of 67. Ouch!
Of course, parents young and old have many demands on their money. As well as coping with the rising cost of mortgages, Council tax, gas and electricity, and so on, they need to dig deep to fund their children's tertiary education, help them onto the housing ladder, etc.
Hence, I suspect that planning ahead for retirement could be the least of parents' worries, which means that their pension contributions could suffer. Thus, by hanging on to the parental purse strings for too long, today's youngsters may condemn their parents to a less prosperous retirement!
Here's how parents delay their plans as the years go by:
Average age at which parents expect to achieve life expectations
Parent's age | 18-24 | 25-34 | 35-44 | 45-54 | 55-64 |
|---|---|---|---|---|---|
No longer have to support children financially | 53 | 57 | 60 | 67 | 74 |
Can afford to retire | 60 | 61 | 62 | 62 | 63 |
Can afford to buy a second home | 39 | 44 | 50 | 54 | 61 |
Source: engage Mutual Assurance
To be blunt: financial independence -- for both young adults and their parents -- doesn't come cheap. Younger parents need to be realistic about their expectations and take steps to ensure that their child's needs don't damage their own future independence.
In practice, this means saving and investing regularly in order to build wealth for when it is needed most. One of the best ways to do this is inside a tax-free savings wrapper known as an Individual Savings Account, or ISA. You can learn more in the Fool's ISA centre.
More: Use the Fool to slash the cost of your mortgage, insurance policies and utilities!