The so-called ‘Bank of Mum & Dad’ is providing a number of parents with a potential financial black hole when it comes to care provision, as they carry on prioritising their children’s financial needs in adulthood over their own.
New research by Wesleyan Assurance Society of over 2,000 adults UK-wide revealed that of those aged over 40 with children, 62% expect to assist them financially in adult life (i.e. beyond 21 years old) with a deposit for a house, helping to pay rent, or saving towards future education, for example. In comparison, 17% have started to make plans for the cost of care in their own old age.
An additional study of Wesleyan’s professional customers – doctors, dentists, lawyers and teachers – shows a similar picture. 80% of customers over 40 surveyed said they expected to financially support their children into adulthood. However they are better prepared for their old age than UK adults generally, with 33% indicating they have made financial plans for their own care provision.
The survey also suggested that the ‘sandwich’ generation (those with elderly parents and financially dependent children) will be worse off in older age compared to their parents.
Just 8% of the over 40s nationally contribute or expect to contribute to the costs of care for their parents. The most common reason given for not supporting parents was that they are ‘financially secure’ and have already made provision for their own care (45%).
This picture was slightly different for Wesleyan customers with 27% contributing or expecting to contribute to their parents care and 64% saying their parents were financially secure.
As well as facing the financial squeeze caused by supporting the younger generation, those surveyed were also unaware of the true cost of care in their own old age, making any potential financial planning even more difficult.
The research also showed that almost 59% of those questioned underestimated the cost of care with little variance among Wesleyan’s customers (62%). On average, respondents underestimated the cost of care by £6,000 with figures showing the true cost of care to be in the region of £27,000, and climbing to more than £37,000 with nursing costs.
“Our research shows that there is a generation who are supporting their children for much longer than they probably expected,” said Bridgit Richards, Wesleyan’s head of marketing.
“These same people could be living longer and yet are less prepared for old age than their parents. While our professional customers may seem to be in a better position, there are still huge numbers who haven’t yet started to plan for care in later life.
“The government is currently consulting on a proposed cap on social care costs of £35,000. Whatever the outcome of this, we would suggest that parents over 40 need to consider their own needs as well as those of their children.”