Newspaper article The Journal (Newcastle, England)

Financing the Family; THERE ARE HIDDEN PITFALLS PARENTS SHOULD CONSIDER BEFORE LENDING THEIR CHILDREN A HELPING HAND, VICKY SHAW REPORTS

Newspaper article The Journal (Newcastle, England)

Financing the Family; THERE ARE HIDDEN PITFALLS PARENTS SHOULD CONSIDER BEFORE LENDING THEIR CHILDREN A HELPING HAND, VICKY SHAW REPORTS

Article excerpt

Byline: VICKY SHAW REPORTS

THE Bank of Mum and Dad is heavily relied upon by many younger people, whether it's a helping hand through the university years, on to the housing ladder or even to pay everyday bills.

But just how vital is it - and what potential pitfalls should parents consider before opening a branch? WHAT ROLE DOES THIS 'BANK' PLAY IN FAMILY FINANCES? FOR many people, the Bank of Mum and Dad could make the difference between achieving their financial goals and struggling to get there.

Parents of university students typically give their children about PS287 per month to support them through their studies, according to insurer Aviva.

One in 10 parents in the UK with children at uni say they give their child about PS750 a month on average.

And research from Legal & General and economics consultancy Cebr found the Bank of Mum and Dad is a major lender when it comes to giving the younger generation a helping hand buying a home.

Parents will lend about PS6.5 billion for such purchases in 2017 and be involved in more than a quarter (26%) of UK property transactions, the research indicates.

And parents with grown-up children still living at home spend an extra PS456 on them annually compared with empty-nesters, according to the Centre for the Modern Family think-tank set up by pensions provider Scottish Widows.

That research, carried out last year, found that as well as shouldering the cost of their child's basic needs - bed and board - parents are also forking out for services used by their adult children, such as Netflix, as well as for their mobile phone bills, holidays, haircuts, clothing and even beauty treatments.

BUT COULD PARENTS FACE HIDDEN COSTS? MUTUAL insurer Royal London warns parents to be aware of various unexpected costs and risks when helping out children financially. It has produced a new "good with your money" guide to highlight the potential pitfalls.

Helen Morrissey, personal finance specialist at Royal London, says: "Making the decision to hand over a large sum of money, whether as a loan or a gift, is a major financial commitment and parents need to consider all the options before deciding to do this. …

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