Fresh research by Aegon has shown that younger generations of adults may no longer be able to rely on the so-called ‘Bank of Mum and Dad’ as patterns of wealth across generations evolve.
The trend of 20- and 30-year-olds being financially supported by their parents is set to go into reverse – as a clear majority are now expecting to financially support their parents as they get older.
The research, tied in with Aegon’s 2024 edition of its Second 50 report which launches today, shows that trends in generational wealth will change how financially self-sufficient people may be in retirement and their ability to support younger generations.
Findings include:
- Two thirds of adults admit to benefitting from the ‘Bank of Mum and Dad’ when they were younger.
- 55% of all age groups of adults with living parents support or expect to support their parents financially in their retirement.
- Adult children are covering expenses for their parents, with 38% regularly paying for dinners out, and 25% helping to cover everyday bills.
- Already less than half (46%) of 45 to 54-year-olds are upbeat about their parents’ financial prospects. This drops to only 2% of 18 to 24-year-olds who share this confidence in their parents’ finances.
Steven Cameron, Pensions Director at Aegon, said:
“Two thirds of people say they’ve benefitted from the phenomenon we often call the ‘Bank of Mum and Dad’, but Aegon’s fresh research shows that the tables may be turning.
“More than half of adults with living parents are already, or anticipate that they will be, the ones stepping in to provide financial support to their parents as they journey to and through retirement.
“This research, along with our latest Second 50 report which publishes today, shows that there is a generational trend when it comes to who will be financially comfortable in retirement and which generations may need help.
“Crucially, there are stark demographic differences. Those aged between ages 45 and 54 are most upbeat about their parents’ financial prospects – with 46% saying they believe their parents have the finances to support themselves through retirement. But this drops to just 2% for those in the 18-24 age bracket.
“For some, parental financial help extends well into adulthood. 37% of people say the last time they turned to the ‘Bank of Mum and Dad’ was when they were in their twenties but one in seven (14 %) continued to receive support into their thirties. Looking to the future, a third (34%) of people express concerns about their parents’ financial situation in retirement, worrying whether they’ll have enough money to get by comfortably.
“The reasons for this are complex. For those in their 50s, their parents in their 70s and beyond may be benefitting from gold-plated final salary pensions. But these are now dwindling in the private sector and current and future generations of retirees will likely have less generous ‘defined contribution’ pensions. Parents of those in their 50s may well have also benefitted from more affordable house prices when they were younger. Again, this has changed with parents of younger adults often not faring so well.
“Our research shows that younger generations are aware that the Bank of Mum and Dad may at some point ‘flip’
“Generation by generation, we are on average living longer and living to 100 is now a real possibility. These findings are a reminder that you can’t assume your later life will look anything like that of your parents. For many, their Second 50 will be uncharted territory and individuals need to look at their own unique circumstances to plan to make the most of later life.
“Aegon’s Second 50 report is a great starting point to scan the developing landscape of later life. We’ve identified ‘Five Fundamentals’ which shape our Second 50.
“The flipping of the Bank of Mum and Dad is relevant to two of these – Wealth and Family situation. These – alongside Work, Health and Wellbeing – all need focused thought so that we can enjoy what for many will be longer, more varied lives.”
