Millennials Borrowing and Lending from the Bank of Mom and Dad

Plenty of parents are helping their adult children financially, but there seems to be a generational disconnect about the extent of that help.

In the United Kingdom, friends and family will put up £6.5 billion this year to support around 300,000 property purchases, according to a study from financial services company Legal & General Group, in collaboration with economic consultancy Centre for Economics and Business Research. That help from what the study calls the “Bank of Mum & Dad” is up 30% from last year’s £5 billion.

Bank of Mom & Dad: A Non-Federal Home Loan Bank?

That amount of money—£5 billion given or lent—puts the “bank” close to what the UK’s tenth biggest mortgage lender lent in 2016, based on mortgage lending figures from CML Economics.

Slightly more than half of prospective homeowners under 35 years old expect to receive financial help toward a home purchase from family or friends, according to the study. Meanwhile, 62% of homeowners in that age group received such help when they bought their current home.

“The bank is a symptom of the problems in the UK housing market, not its solution,” the study says. “Most obviously, it fails to address the needs of aspiring homeowners who work hard but cannot afford a deposit and don’t have friends and family able or willing to help.”

This Bank Is a Global Institution

Of course, parents helping out their kids monetarily isn’t confined to the UK.

Results from a survey by the Pew Research Center published in 2015 showed that 61% of parents with adult children in the United States said they had helped an adult child financially in the preceding 12 months. That was true for 60% of Italian parents with adult kids and 48% of German parents with adult children, the survey said.

In the U.S., only 39% of adult children said they had received help financially from their parents in the past 12 months, according to the survey. That compares with 32% in Germany and 43% in Italy.

Are these signs of a generational disconnect?

“Various factors may help to explain the differences between the two generations,” the Pew Research Center said.

“For example, social desirability may play a role, as some parents may be inclined to say they have helped their adult children, while the children may be inclined to say they did not receive any help,” the study continued. “In addition, the two generations may have different definitions of what counts as financial help.”

Balance Sheet Irregularities?

According to a 2017 report by Head Solutions Group on behalf of TD Ameritrade Holding Corp., slightly less than half of millennial parents with a living parent say they received parental/guardian financial support.

That support averaged $2,543 over the past year, the report said. Millennials were most likely to receive financial support for meals out, entertainment, and groceries. But the highest-value financial support came for rent or mortgage payments, averaging $2,033 over the past year.

But again, there's a difference between what the generations are saying.

Three out of four grandparents in the TD Ameritrade study said they had provided financial support to their adult child over the past year. They said they provided an adult child and his/her family with $4,527, on average, in financial support over the past year, nearly $2,000 more than the kids reported.

“Millennial parents may be receiving more support than they realize or admit to,” the study said.