Will this cosseted new generation break the Bank of Mum and Dad?

Will this cosseted new generation break the Bank of Mum and Dad

1:41 AM on 19th May 2011

Paul Digweed adores his grown-up children; he’d give them the earth if he could, and he is inordinately proud of them. There’s just one problem: they’re now aged 22 and 20, and he’s beginning to wonder whether they’ll ever be financially independent.

Paul, 51, affluent and self-made, runs his own security business. He hoisted himself into his current position by sheer hard graft and, understandably, he wants life to be less of a financial struggle for his own children. Which is why he helps them with hand-outs as much as he can.

‘But I do think: “Where will all this end” When I was 18, I’d been working on a building site for two years. I was paying my way, living on my own in a rented flat. There was no expectation that my parents would support me past 16, let alone 18. My dad was a shipbuilder — there just wasn’t the money to go round.’

Saving for the future: Grown-up offspring are now more of a drain on parent

Saving for the future: Grown-up offspring are now more of a drain on parent”s resources than they were as children

Paul has a son and daughter from his first marriage, and two younger sons — Harry, four, and Ben, three — with his partner Tina, 34, a swimming instructor. They live comfortably in Eastleigh, Hampshire.

‘I’m an indulgent father,’ he says. ‘My children certainly have more materially than I ever had at their age. I was thrilled when my daughter, Carmel — the first in our family to go to university — got a place to study journalism at Sheffield.

‘She’s won awards and now works in PR at the Barbican, but the cost of living is high in London. Although she’s earning, I’m still giving her 50 a week to help her out. Of course, I supported her through university, too — I topped up her student loan with another 250 a month — and now that her brother is at Bristol studying graphic design I’m doing the same for him.’

Paul’s words will resonate with many middle-class, middle-aged couples who anticipated that when their children reached adulthood they would have cut free from the parental purse strings.

It seems, however, that the reverse is true: new research demonstrates that our grown-up offspring are actually more of a drain on our resources than they were as children.

A poll of parents with children aged 18-30, conducted by the Coventry Building Society, shows that we typically shell out a total of 43,000 on them, funding such milestone events as weddings, first cars, deposits on homes, university fees and rent.

Paul intends to give a comparable financial leg-up to all his children: ‘When it comes to the younger two, they will have the same help. I envisage supporting them well into my 70s.

‘We’ve made sacrifices, and Tina works on Sundays to bring in some extra money. But I don’t begrudge my children a penny, since we’re here to give them the best possible start in life.’

It seems that the valiant ‘Coping Classes’ — the middle-income band squeezed between the very rich and those on state handouts — are the most self-sacrificial social group, committed to helping their grown-up offspring, often at the expense of themselves.

The bank that keeps on giving: There

The bank that keeps on giving: There”s now an expectation that parents will fund their children well into adulthood, helping to pay for their education, first home and wedding

According to a recent report by the insurance company Friends Life, 57 per cent of middle-income parents expect to help their children buy a house, despite facing unprecedented financial pressures themselves.

Nina and Martin Parker fall into this category. They are not conspicuously wealthy, but their savings have benefited their adult children, Tom and Anna, who are in their 20s.

Martin, 51, is a police dog handler, while Nina, 49, works in beauty retail: their combined salaries are not vast — around 50,000 — and their backgrounds are modest, but they were determined their children should have what they were denied.

Tom and Anna were each given a nest egg of around 40,000 — and Anna chose to spend hers on a lavish wedding.

Her 2,500 dress was from Harrods; the 1,250 wedding cake was a glorious confection by the same patissier who made Madonna’s, and the sumptuous setting for the 42,000 celebration was a flower-decked tithe barn at a plush hotel in Virginia Water, Surrey.

‘We’ve gone without ourselves so we could give our children the best,’ says Nina, from Epsom, Surrey. ‘The contrast between our wedding, in 1979, and Anna’s could not have been more extreme.

‘We invited 40 guests to a chicken dinner in a modest restaurant. Anna had 128 guests, and everything was picture-perfect, from the lavish floral decorations to the weather: it snowed and then the sun shone, so the photos were heavenly.’

While Anna’s money was all spent on just one memorable day, Tom’s allocation had a less ostentatious use.

His parents gave him around 40,000 to help fund his degree course in American Law at the University of Texas.

‘We were happy to subsidise his studies — the fees were very high, but the course was an interesting one,’ says Nina. ‘Both Tom and Anna are happy that the arrangement was a fair one and we don’t begrudge the cost. We’ve gone without ourselves, so we could provide the best for our children.’

Brenda Nicholson, 57, a freelance marketing consultant, and her husband Philip, 58, an electricity generation engineer, have been similarly judicious.

The Nicholsons, who live in Lichfield, Staffs, have two children: Rebecca, 18, and Alex, 23. Brenda and Philip have saved regularly to fund their education. ‘Our aim was to ensure that the children didn’t leave university with huge debts,’ says Brenda. ‘Philip and I struggled financially when we did our degrees. We had small grants and our parents weren’t able to supplement them. Sometimes, we ran out of money even to buy food.

‘We didn’t want our children to have to scrimp as we did, so we put aside money for them. I’m sure we’ll have spent well over 40,000 on each of them between the ages of 18 and 24 alone.’

In order to fund their grown-up son and daughter, the Nicholsons have pared their own spending. They live relatively modestly in the same four-bedroom house that has been their family home for 28 years. They have not changed their Ford Ka for eight years.

‘We’re certainly not complaining,’ says Brenda. ‘Hundreds of thousands of parents make equal or greater sacrifices, but we would probably have moved to a bigger house and changed our car more regularly if we hadn’t been subsidising the children’s education.

‘But the real impact will be on our retirement income. We haven’t saved as much as we might have done.

‘We’ve never wanted to spend lavishly; we’ve just wanted enough to live on. We don’t worry — we’ll be OK — and we certainly don’t resent the money we’ve spent, but it is the unforeseen extra costs that have taken us by surprise.’

Student loan: Parents are having to pay thousands in tuition fees and living expenses to put their children through university (posed by models)

Student loan: Parents are having to pay thousands in tuition fees and living expenses to put their children through university (posed by models)

The Nicholsons contributed 20,000 to Alex’s living costs when he studied for a science degree at Cardiff University. Since he graduated and found work, they have provided a further 2,000 for a deposit on his rented flat and subsidised his first month’s bills with a gift of 1,000.

Rebecca, meanwhile, is poised to begin a psychology degree. Tuition fees have risen since Alex went to university, which means the ‘Bank of Mum and Dad’ will be further depleted. The Nicholsons expect to shell out 30,000 on their daughter’s education.

‘I don’t know how parents on low incomes will afford to help fund their children through university, especially now fees are likely to reach 9,000 a year,’ says Brenda. ‘Philip and I have a reasonable joint income, but supporting our children has had an impact on our lifestyle. We don’t have foreign holidays, we don’t eat out, and we certainly don’t buy expensive clothes.’

So why are today’s parents subsidising their adult offspring to such an unprecedented extent Kim Stephenson, an occupational psychologist who has also worked as a financial adviser, is author of a book called Taming The Pound.

He points out that a greater proportion of school-leavers go to university than they did in their parents’ and grandparents’ generations. As a result, fewer teenagers are leaving school, getting jobs and contributing to the household income than ever before.

Other factors, too, have left parents feeling the squeeze. ‘For the past 20 or so years, easy credit and rising house prices have allowed even those parents who had not saved to borrow substantial sums of money to help their kids,’ says Stephenson.

‘There was no difficulty in putting an extra 50,000 on the mortgage to fund the children’s university education or help them onto the property ladder.

‘Now, all of a sudden, we’re realising that house prices aren’t guaranteed to rise every year.

‘We can’t guarantee that the loans we’re taking out on behalf of our children will be repaid from the profit when we sell our homes. So suddenly we’re thinking: “Heck, this is real money.” ’

Neither can we predict the exact sums our children will need: rising tuition fees and escalating living costs have confounded even the most prudent parents.

So, what can we do to prepare for such unforeseen costs According to Stephenson, the solution is disarmingly simple: save, and do it sooner rather than later.

‘In psychology, there is an effect that is called the “money illusion”,’ he says.

‘What it means is, we’re not good at recognising how small savings in early years end up being worth a lot more than big savings later on, because of inflation and compound interest.

‘So even if you can put away only 5 a week, in 20 years it will be worth a lot more than if you take the view: “It’s only a fiver. It isn’t much. I’ll leave it until I can save a decent amount.” ’

The tendency to save, moreover, can become ingrained; once it is, it better prepares us for future commitments. Stephenson adds: ‘Once you’re a saver, it becomes your habit. It means you put money away as a matter of course, and learn to defer gratification so you can afford what you really want in life, like educating your children.’

Yet almost a quarter — 21 per cent — of parents with children under 18, questioned in the Coventry Building Society poll, have no money saved for their future, while 62 per cent have saved 1,000 or less.

Moreover, 40 per cent of parents with children aged 18-30 said that they wish they had started saving for their children’s future earlier.

Long-established saving habits allowed both the Nicholsons and the Parkers — although neither of them are prodigiously well-off — to help their adult children in the ways they chose.

‘The present generation of parents is definitely more indulgent towards our older children than ever before,’ adds Brenda Nicholson.

‘We want to give them the best, and with two incomes coming in we can just afford to support ours well into their 20s.

‘I do not think that our children are demanding — there is just an expectation that we will be there, financially supporting them; always striving to give them the best start in life. But I don’t think the majority of us resent our sacrifices one bit.

‘We wouldn’t have had children if we hadn’t wanted to give them the best start in life, would we’