The Bank of Mum and Dad Search for Financial Guidance
The age of the millennial has been technologically enlightening, improving the ease in which we can access information. However, when the bank of mum and dad is on the rise, a recent survey has found that people are concerned with a lack of information on gifting money to their younger relatives.
Rising inflation, property prices and slow or static wages, price many younger millennials out of the property market altogether. Those that do enter the market are frequently aided by the help of their parents or close family.
The Bank of Mum and Dad (BoMaD), according to recent Nationwide research, is now one of the most popular methods of acquiring deposit money for houses, spending over £6 billion in 2018 alone.
Although dedicated parents will offer financial support to their children without hesitation, a recent report, carried out by Key, suggests that over 55s desire additional advice around BoMaD financial issues.
76% of over 55s find gifting rules confusing, anxious that they could easily make a costly mistake. Additionally, 24% worry that they do not have adequate financial understanding and knowledge necessary to make positive financial decisions. When all other financial lenders are industry experts, it is important that a lender spending billions each year should also have appropriate levels of guidance and support.
40% of respondents aged 55 and over were adamant in their beliefs that more online guidance needs to be made available. 78% also believed that tax incentives should be offered to BoMaD financers when the money is used positively for major life events like house purchases, university debts or clearing debts as the social and economic benefits will be extensive.
The report also highlights similar concerns raised by the younger beneficiaries. 46% of people aged 18-40 were also anxious that their parents did not have enough relevant financial information to make the right decisions as BoMaD with 76% demanding more online guidance to ensure that those kind enough to lend their money are not ripped off.
The apprehension of over 55s is so severe that 26% want advice on financial gifting issues with 46% concerned that official and expert guidance will be too costly to pursue. When 1 in 4 house sales are funded by this financial lender, considerably more needs to be done to educate BoMaD users of their rights.
Dean Mirfin, Chief Product Officer at Key, said: “Collectively BOMAD is a major UK financial institution but one that needs advice and guidance so that parents feel empowered to make the right financial decisions for themselves and for the next generations.
“Older homeowners in the UK own as much as £1 trillion in housing wealth according to our estimates and are also likely to have generated significant pension wealth as well as other retirement savings. The challenge for parents wishing to lend or gift money is to decide which assets are the most appropriate and most tax-efficient for gifting. We believe advice is key.
“The over 55s are right to demand increased guidance and support and it’s no surprise that the vast majority would support tax incentives providing the money is used for major life events, such as a first property purchase, university fees or debt repayment. At Key, we would support any initiatives which give clearer guidance to the Bank of Mum and Dad about the important intergenerational financial decisions”
When BoMaD funded property transactions are helping to increase the property market and boost the economy, the Government should look to ensure that the lenders are fully educated so that they do not lose out because of their generous and selfless acts.
Do conveyancers find that over 55s are anxious about gifting rules? Should there be more accessible, transparent information available to this sector? How important is the BoMaD to the property industry?