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The Bank of Mum and Dad has long been a source of funding to help first-time buyers get a foot on the property ladder. Now, new research suggests that generous parents are helping to fund other milestones for their adult children.

The research from the investment platform Interactive Investor found that helping grown-up kids with the cost of university education was more popular than contributing to a deposit for a home.

Other ways parents support their children financially include allowing them to stay at home rent-free, with 50% of respondents saying they are doing this.

Parents are also buying cars for their children or helping them with car-related expenses, with 46% of respondents chipping in this way.

More than a quarter of parents said they have contributed to a savings account for their children, with 23% paying towards an Individual Savings Account (ISA) for their adult child.

A less popular choice, albeit still something done by one in 10 parents, was paying into a pension for their adult children. Non-financial assistance included helping with childcare.

Becky O’Connor, Head of Pensions and Savings at Interactive Investor, said:

“There is a lot of attention given to how the Bank of Mum and Dad can help with buying a first home, but this unofficial institution is busy in many other areas of financial support for adult children, too. More than half of respondents had helped with their adult children’s university costs and allowed them to stay at home, rent-free. A large proportion had also helped with car costs, as well as house deposits. The high percentage of older people helping out their adult children reflects a depressing reality: that it is difficult, if not impossible, to manage these life milestones without any parental help. The poll suggests that the younger generation is strained financially, dependent on their parents for many ‘big ticket’ costs that would be beyond their ability to save for.

“Parents have become the gatekeepers to their children’s adulthood; the wealth level of the previous generation ultimately determining which milestones are achievable and which are not. That’s just those whose parents are able to help, of course. The scale of the assistance also demonstrates how the odds are stacked against those whose parents can’t help when it comes to wealth accumulation. It’s an economic dependence that can have practical and emotional consequences, both for the parents, who may not have foreseen having to support their children quite so far into adulthood, and for the children, who may want to be financially independent, but find they cannot yet manage it. It also has social consequences, for instance, through young adults delaying having children or choosing not to go to university.

“Among those parents who are able to help, it’s heartening to see payments into pensions and ISAs feature among the responses – a recognition that there are other ways to assist beyond leg-ups onto the property ladder and where the rewards might not be reaped for decades to come. A pension top-up, though perhaps less welcome than a lump sum that can be used in the here and now, could be extremely valuable one day.”

While parental generosity is to be applauded, you must factor any gifts or financial support into your Financial Plan to ensure they are affordable in the long term.

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