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

Pensioner shivering with cold next to old-fashioned stove © Getty Images

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.

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.

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.

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.

Recommended

How to cut the cost of childcare
Personal finance

How to cut the cost of childcare

Childcare is expensive, yet few people are drawing upon all the government support they are entitled to. Ruth Jackson-Kirby explains what help is avai…
6 Jul 2022
How to cut your car’s fuel bill as the price of petrol hits a record high
Personal finance

How to cut your car’s fuel bill as the price of petrol hits a record high

The cost of filling the typical car’s 55-litre tank with petrol is now around £105. Here, Saloni Sardana looks at ways to keep your refuelling costs d…
5 Jul 2022
How to claim compensation for travel delays
Personal finance

How to claim compensation for travel delays

It promises to be a summer of chaos at airports, with thousands of flights cancelled and huge queues, while strikes on the railways haven't helped eit…
5 Jul 2022
We’re doing well on pensions – but we still need to do better
Pensions

We’re doing well on pensions – but we still need to do better

Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn S…
4 Jul 2022

Most Popular

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
Is inflation about to drop as recession takes hold?
UK Economy

Is inflation about to drop as recession takes hold?

Central banks are raising interest rates in an attempt to curb soaring inflation. But will that push the economy into recession? John Stepek looks at …
5 Jul 2022