Thursday, April 9, 2009
Category:
Consolidation
According to The Children’s Mutual and the Social Issues Research Centre (SIRC), many parents may be set for rather unattractive finances in the future.
It would seem that there has been a rise in what has been dubbed the ‘bungee brood’ of young adults who continuously rely on their parents for financial support.
Despite relying on their parents in this way, the majority of the ‘bungee brood’ nevertheless consider themselves to be ‘financially independent’. However, the truth is that they continue to accept parental handouts for such things as day-to-day living costs and house deposits.
In many cases, there are no plans for repayment of the subsidies and therefore the study suggests that this scenario will never cease. Unfortunately, it could have a significant negative impact on the future finances of many parents. The study, in which over 1,000 18 to 25 years olds were questioned, revealed that 80 percent believe that they are ‘financially independent’ despite receiving parental handouts. 66 percent went as far as declaring themselves to be ‘completely financially independent’. Key financial contributions from parents were recognised as being those towards the cost of university, house deposits and weddings. However, in addition, the study also revealed that 39 percent of youngsters pay little or no rent, 17 percent accept financial assistance when it comes to paying their bills, and 41 percent receive handouts to cover living expenses.
The study also acknowledged significant changes in society over the past century. During Victorian times, children were encouraged to remain at home in order to provide their parents with a ‘valuable source of extra income’. Today however, most young adults are relying on their parents rather than supporting them.
Chief Executive of The Children's Mutual, David White, commented: "There has been a major change in the dynamic of family finances and it needs to be dealt with now as the problem could be growing for anyone who has, or is planning to have, children.
Many parents of today's young adults are choosing to make their children's finances their problem and are increasingly faced with difficult choices - perhaps to take on more debt or to reduce funds that are available for them. "Child Trust Funds are one way of providing the parents of today's youngsters with an opportunity to lay financial foundations for their children's futures, with a view to reducing the possibility of negative impact on their own finances in the future. And with more than four million children in the UK now in receipt of a Child Trust Fund voucher, and 37 per cent of young adults in our report saying that having a savings fund would secure their independence, we are on the way to changing attitudes to saving for the longer term."
The study revealed eight key areas in which parents financially assist their 18 to 25 year olds. In order, these include: charging their children a nominal amount of rent, contributing towards the cost of living, helping them with the cost of education, subsidising the cost of rent , providing contributions towards trips and holidays, assisting in the payment of bills, making wedding contributions, and making payments into savings accounts or trust funds.
Also in ranked order, the study revealed that 18 to 25 years olds feel that the following five actions will make them financially secure: buying their own home, earning a higher wage, paying off debts, having a savings fund, and being in control of their spending.
............................................................................................................................
Parents who have invested heavily in their young adult offspring, and who find themselves financially challenged as a consequence, could consider using a secured loan to consolidate their debts. Likewise, offspring who have flown the nest and who now own their own properties could consider a secured loan if they have debts to repay or weddings to fund. A secured loan is one of many financial options to consolidate debt and it should be remembered that consolidating debt may increase the amount paid back overall and may extend the repayment period of debts.
