Advertisement
Editor's letter

The best thing you can do for your children is to secure your own finances

The "Bank of Mum and Dad" is now the 11th-largest mortgage lender in the UK. But giving your children money may not be the best way to help them, says Merryn Somerset Webb.

Pensioner shivering with cold next to old-fashioned stove © Getty Images
Generosity is fine but make sure you look after yourself too

You might be worried about the possibility of a global recession, trade war, or even Brexit. I'm worried about the Bank of Mum and Dad (BoMad). The latest report from Legal & General on the amount lent inside families to those wanting to get on the property ladder shows a huge transfer of wealth down the generations. In 2018 BoMaD lending came to £5.7bn. This year it is forecast to hit £6.3bn, with the average contribution knocking around £24,000. It isn't quite the same thing (most parents don't expect the money back), but on the numbers alone, this makes families the 11th-largest mortgage lenders in the UK.

Advertisement - Article continues below

The trend makes sense, of course: one of the reasons for rising wealth inequality in the UK (as everywhere) is that we are all living longer so wealth is trickling down more slowly than it has in the past. There's also nothing wrong with it: if you have spare cash why on earth not give it to your children to spend? As financial advisers like to say: there are no pockets in a shroud. The problem is that those who don't have spare cash are giving too finding it by downsizing, using equity release, cashing in pensions and, worst of all, taking out more debt themselves.

Advertisement
Advertisement - Article continues below

The result? Twenty-six percent of those who have lent or given money say they are worried they won't have enough to live on in retirement; 15% say they have already accepted a lower standard of living; 11% say they feel less secure. In a world where the state pension age is constantly shifting out, and so the number of people in receipt of it is shifting down (by about 300,000 in the last two years), this is miserable.

Advertisement - Article continues below

It also isn't very sensible. As I think I might have asked here before, will your children really thank you if, as a result of your generosity now, they have to help finance your old age later? I doubt it. Perhaps the best present you can give them is not your own delayed retirement (6% have delayed retiring to finance giving), but your own financial security? You can't control global markets or economies. You can (to a degree at least) control this.

Mind-blowing opportunities

turn to our cover story

Finally to Brexit, where passions are as inflamed as ever. There is no one in this fight who isn't convinced they have right (and democracy) on their side. For more on this see here, where I look at how Adam Smith forecast the outrage machine.

You should also read our book reviews (yes, we do think you should read Rod Liddle on Brexit!), we also explain just how this proroguing business works, and finally we think about whether it is time to be "very positive" on the increasingly cheap UK stockmarket. Answer: if you can manage to rise above everyone else's Brexit hysteria, very probably yes.

Advertisement
Advertisement

Recommended

NS&I: a safe home for savings
Savings

NS&I: a safe home for savings

State-backed National Savings & Investments is ready to accept much more money and offers some of the highest interest rates.
28 Jul 2020
Want a pet? Watch out – they are a pricey proposition
Personal finance

Want a pet? Watch out – they are a pricey proposition

Dog and cat ownership is booming. But before you invest in a furry friend, consider how much it costs to buy, feed, care for and insure one.
22 Jul 2020
Covid-19 has caused a spike in divorce – here's how to cope
Personal finance

Covid-19 has caused a spike in divorce – here's how to cope

Lockdown has caused a spike in people filing for divorce. But splitting up involves some arduous administrative tasks. Here's what to do.
14 Jul 2020
Look beyond cash Isas to stocks and shares
Stocks and shares ISAs

Look beyond cash Isas to stocks and shares

Interest rates on cash Isa accounts are too low and stocks do better over the long term. Consider a stocks and shares Isa instead.
7 Jul 2020

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
Don’t despair on dividends – these companies could be set to bring them back
Income investing

Don’t despair on dividends – these companies could be set to bring them back

The value of dividends paid out by UK stocks has plummeted this year as companies “rebase” their payment policies. But things could soon start to look…
6 Aug 2020