Parents providing debt solutions to adult children

Many UK parents are bracing themselves for a future that involves increasing monetary support for adult children who are struggling to make the step up to financial independence, according to a recent report commissioned by Children’s Mutual.

The first ‘Coming of Wage’ report was carried out by the Social Issues Research Centre in Oxford and has thrown up some dismal readings for parents of teenage children. Almost half of the parents questioned expect that their children will be unable to support themselves when they turn 18, and a staggering 95% anticipate continuing making financial contributions to their children once they leave home, effectively running their children’s debt management schemes for them.

As a result the list of items that parents are expecting to pay on behalf of their children is growing and now includes: further education, deposit on their first home, first car and ongoing expenses to ensure that children don’t fall into debt. The report also highlighted that close to 67% of parents believe that their children will not be able to attend university without their financial support, and just short of half believe that their children will have no chance to buy their own home without their aid.

However, what the report has also highlighted is that although many parents are bracing themselves to pay for their children’s expenses, they are struggling to finance their intentions. Some are dipping into their pension funds, or taking money out of their savings, but most are finding it difficult to set aside enough money in advance. The average amount being put away each month averages £50, equivalent to £600 per year, in order to pay for the child’s first deposit or for further education fees.

The amount of teenagers attending university now is four times greater than 30 years ago, and the average debt of graduates now leaving further education stands at £12,893. Even with the favourable rules about repaying student loans, many parents believe that their children will not be able to repay that debt without their help. To make matters worse the amount required as a deposit for a first home has risen 450% in just ten years.

As a result of all the expense involved in buying a house, prices have experienced a meteoric rise over the last ten years, and with increased graduate debt it is easy to see why the average age of the first time buyer has risen to 34. That is also why parents are providing debt solutions on the cheap for their adult children via their savings and pension funds, and as a result may well be looking forward to a bleak financial future themselves.