UK Edition
Revealed: the true cost of Bank of Mum and Dad is £84,632 per child
For better or worse, the Bank of Mum and Dad has become a mainstay of British life. With high property prices putting the dream of home ownership out of reach for many, young people increasingly rely on their parents to help fund a deposit.
Research by Legal & General, the insurer, estimated that 62pc of under-35s buying a home received some form of financial help from their family. Parents are also being called on to cover other expenses such as university education, internships and cars. How much should parents be expected to help?
Telegraph Money analysis shows that parents who decide to support their child financially past the age of 18 in these four key areas would end up spending almost £85,000.
The cost of education
High tuition fees and the complex student loan system mean that some parents who can afford to might choose to help their child pay for higher education.
A student at an English university will usually pay £9,250 for each year of undergraduate tuition (there are different fee systems in Scotland, Northern Ireland and Wales). There is also the cost of living to consider.
The Institute for Fiscal Studies reported that the average graduate would end their study with £50,000 of debt. Around £6,000 of this debt will be interest accrued during the three years of study.
Total cost: £44,000
Getting on the road
Owning a first car, a rite of passage for many young people, can be an expensive way to gain independence. While young people will generally buy cheaper cars, high insurance premiums mean that the overall cost of getting on the road is high.
According to the AA, the average comprehensive insurance premium for someone aged 17‑22 is £1,629 a year. A new driver would tend to buy a second-hand car such as the Seat Mii, which costs around £4,000, depending on the condition, the AA added.
Our analysis assumes that the Bank of Mum and Dad would pay for the car, a year’s insurance, £145 for road tax and a one-off £50 to fill up the tank.
Total cost: £5,824
A foot in the door
Internships are often criticised for giving companies cheap labour. Yet they remain a popular way for young people to gain experience of work in their chosen field, either during or after university.
There are no official statistics relating to the number of internships undertaken, but the Institute for Public Policy Research (IPPR) found that 11,000 internships were advertised each year.
The All Party Parliamentary Group on Social Mobility said the real figure was much higher as internships were often arranged through family and friends, rather than being formally advertised. The IPPR reported that 58pc of internships were located in London, which adds a further cost to those living outside the capital.
Rebecca Montacute, of the Sutton Trust educational charity, said an intern in London would spend around £3,000 on rent, bills, food and other expenses in three months, assuming that the company met travel expenses.
Total cost: £3,057
The first rung of the ladder
House price growth has left many young people unable to get on to the property ladder without assistance from their parents. The average age of a first-time buyer is now 31, according to Halifax, the lender, and a typical first-time buyer deposit is more than £30,000.
Financial assistance from parents can range from giving a small amount of money to providing the full deposit.
While this is often done on an informal basis, parents should consider consulting a solicitor to formalise any financial agreements, according to the Post Office, another lender.
Total cost: £31,751
Valuing independence
Parents who support their child through university, get them on the road, pay for an internship and help them on to the ladder would spend £84,632, according to Telegraph Money’s analysis. But no two families are the same and there are many variables to consider.
Outside London, the overall Bank of Mum and Dad expenditure per child could be much less. But in some areas this money wouldn’t go far enough. Martin Willis, 28, was able to buy a flat in east London only with the financial support of his parents.
He bought his one-bedroom property, worth £275,000, three years ago, using a £175,000 gift from his parents as a large deposit. Mr Willis, who works in comedy, said buying in the capital had been possible only with the support of his parents.
“Property is more expensive in London and I think many people here do get help,” he said. “Even so, there’s only me and one other in my circle of friends who are homeowners. Even for people with a lot of privilege it’s a massive amount of money.”
Mr Willis said his parents had also paid for accommodation and living expenses during his first year at university and he was given dividend-paying shares in the family business. Not all are in a position to be helped by their parents. Others choose to fund themselves as much as possible.
Lauren Neno, 23, is currently trying to raise a deposit to buy a house in Leeds and wants to do so without relying on her parents for the cash. Her father gave her £1,000 to start her savings pot and she has since saved £9,000 on her own.
Miss Neno has received no other support from her parents. She bought her own car, runs it herself and values this independence.
“I didn’t expect any financial support from my family to buy my first home,” she said. “So other than the money my dad gave me, which was a nice start, I was always intending to save the deposit for a house by myself.”
Miss Neno, who works in financial services, saves around £600 a month with Yorkshire Building Society and is now ready to buy a property.
She said she had built her savings up by being financially disciplined and restricting her spending on luxuries. “Once I had decided I wanted to buy, I worked out what I’d need to save and how I was going to do it,” Miss Neno said.
She expects to put a 5pc deposit down and use any leftover cash to decorate the property. Mr Willis said he sympathised with those who could not afford to get on the property ladder.
He said: “I do feel quite guilty constantly reading the news and knowing that my peers, who have worked for a long time in tough jobs, have no real chance of owning a home.”
adam.williams@telegraph.co.uk