Children raid savings accounts to bail out parents

28 April 2008 / by Joy Tibbs
While parents are often called upon to help their children with house deposits and out-of-control debts, adult children are now finding the tables have been turned as their parents start clawing back their cash.

The second annual Savings and Investment report from Scottish Widows shows that adult children in the UK loan their parents more than £6,500 on average, a collective £11 billion. And 13 per cent have been forced to shell out five or more times for their parents.

The main reasons for child-to-parent loans were found to be: debt management debt management(35 per cent); car expenses (15 per cent); spending money (14 per cent); and living expenses (14 per cent). Just one per cent used the money to help them enjoy retirement.

Savings expert, Anne Young, said: "It's obvious that parents have felt the pinch as a result of being 'sapped' for thousands of pounds from their adult children, and are now turning the tables on them and 'sapping back'.

"As over a third of parents (36 per cent) planned to use the money they handed out to their children for their own retirement, they are finding that they are missing the money in their later years.

"I do expect the trend of parents having to go back to their children for money to increase in the future."

On the other hand, adult children continue to ask parents to give up the contents of their savings accounts and investments, at an average cost of £12,610. The majority (42 per cent) used handouts from parents to pay off debts.

Ms Young continued: "It seems that although people could well be tightening the purse strings at a time when the credit crunch could affect finances, families have to resort to helping each other out.

"The amount of money given or loaned by parents and the number of children 'sapping' savings have both increased in the last year, to the extent that the overall Sap Fund of children from their parents' savings is well in excess of £60 billion."

She added: "As the figures show, handouts are increasingly being used to provide an emergency loan, or to pay off debt.

"Parents and children can protect themselves against this situation by putting small amounts of money often into a tax efficient savings vehicle such as an ISA."

© Fair Investment Company Ltd