Repaying the bank of mum and dad

Yes, when it comes to old age, there is a real chance that more children will be supporting their parents financially than they might expect. MetLife research from earlier this year showed that 30 per cent of those aged over 40 say they are behind with their retirement savings, while 16 per cent of those over 55 who have already started to benefit from pension freedoms say they have not yet saved enough for their retirement.

This one in six of the older generation are concerned that they will need to rely on their children to help fund a comfortable retirement for them, which is likely to come as a nasty shock to some. They have been hit, apparently, by a combination of “low long-term interest rates, market volatility and narrowing choices” when it comes to retirement income.

Of course, many people reading this list would without hesitation add "supporting their children with everything from going through university to buying their first home" as well, something many of the people surveyed may have been less inclined to add to the blame game.

It is not just buying a home that children expect the bank of mum and dad to fund

In fact, it is not just buying a home that children expect the bank of mum and dad to fund. Nearly a fifth of children have also turned to their parents when it comes to paying for home improvements. 

Plentific.com – a home search marketplace – found that a quarter of buyers across the UK now receive financial help from their parents, with London unsurprisingly ranking top of the table with 59 per cent of homebuyers needing mum and dad’s help. 

Perhaps also unsurprisingly, 48 per cent of people in London who undertook home improvements went back their parents to get some cash to do the place up, but Liverpool was not that far behind at 31 per cent while Brighton hit 17 per cent.

For those under 34, the figures rose much higher – 44 per cent asked parents to help pay for DIY projects, 47 per cent needed help buying their first property, but a whopping 58 per cent of under-34s across the UK needed help to buy any property. Any property. Seriously?

Well, I am sure you have all had a lot more experience than I have when it comes to having conversations with clients about the importance of keeping some of their own money back for themselves rather than funding every whim of their children. Yes, of course I am being flippant, there are good reasons to do this for sure. But I am not sure that in every case there is a good reason.

So, it strikes me as only fair and fitting that at some point in the future all this money that has flowed out of the bank of mum and dad would have to be repaid – with interest. Likely? Who knows…I would like to think so, but I think the reality is that some will, and some will not.

To be fair, the majority of us would do anything to avoid our parents struggling in their old age, and if it means we have to give up something to give them an easier time, I would hope we all would. But relationships fracture at times, and they can often disintegrate after money has changed hands and a disagreement has ensued.

So it is vital that any bank of mum and dad gifts – or loans – come with the relevant conditions attached so everyone knows what is expected of them in relation to that money, which might sensibly include that the children cannot come back time after time asking for more.

The reality is some parents will need to have long-term care when they get older, yet more than 70 per cent of us are not factoring this into our financial planning even as we get closer to an age when we might need it, according to Tilney.

However, while it seems reasonable to think that people might be helping their parents in retirement, it looks like the oldies may have the last word when it comes to who has the power when dealing with money. 

Parents are being increasingly picky about how their hard-earned cash is being spent by their little darlings when they shuffle off this mortal coil. Apparently more than three quarters of the over-55s interviewed on this topic by Prudential said they wanted some kind of say in how their legacy was spent.

A third do not want their money "squandered" by their children, and a similar number want to see their grandchildren benefiting too.

So, if you have clients who have benefited from – or more likely been – the bank of mum and dad, let them know their turn is coming, and the kids had better hope they treated their parents well, otherwise their legacy might just be going to Fido instead.

Alison Steed is a freelance journalist