The start of a year is a good time to share what we have learned during the previous year; especially things that helped influence us. If there are 2 things, we wish for 2021 they are for the pandemic to be defeated and for families to be more open when talking about money. The pandemic has exposed money fragility and the importance of talking more openly about our financial situations.
At Offspring, we encourage families to be more open when talking about money because it is important for their relationships, health, and wellbeing.
In our first blog of the year, we share extracts from articles and research that our team found interesting.
Boomerang children, and talking to them about money
A quarter of under-34s still living at home. Why?
- First, moving out is becoming unaffordable
- Second, the pandemic and the economic fallout has caused a trend to move back home
- Third, the matter of money is now more of a family affair than ever before
How should Mum & Dad talk to their adult children about their long term financial situation?
As a society, we often read how important the Bank of Mum & Dad is to their adult children when helping out with house deposits and other costs. This is one way in which social saving, and gifting, manifest themselves.
The number crunchers at Fidelity International have estimated that adult children living at home cost parents an average of £1,780 a year in added household expenses.
Their practical guidance to parents is “….. being aware of the commitment and factoring children into your financial life plans, no matter their age, can help you feel better prepared to cope with what might be around the corner.”
This requires open communication about money within families. The lack of communication leads to mismatched expectations, poor planning, and potential conflict. All of these situations can be avoided if families just dropped their reserve when it comes to talking about money. We think money conversations should be treated like discussions about any health issues that impact the family.
🤔 Do Children repay Mum & Dad?
According to the M&S Bank “While millennials or Gen Z-ers may be boomeranging back to live in the family home at some stage in their adult lives, with parents often supporting their children to get a foot on the property ladder, this support is not a one-way street, with many younger generations also helping parents and other family members,”
Almost half of millennials and more than half of Generation Z-ers have paid into the Bank of Mum and Dad.
Providing more support to their parents than any other age group, 23- to 38-year-olds have given £1,161 to family members over the last 12 months to help with their day-to-day finances, according to data from M&S Bank, compared with £871 from 16- to 22-year-olds, £756 from 39- to 54-year-olds, £498 from 55- to 73-year-olds and £563 from the over-74s.
“Our findings contrast with the common narrative that financial support in families only flows one way, or that it’s all about the money, with many keen to hear about the financial learnings of both older and younger family members.”
“The research clearly demonstrates that as lifestyles and family models evolve, so do financial realities among family members,” Kay Neufeld, head of macroeconomics at the Centre for Economics and Business Research (Cebr), which authored the research report, said.
“While parent-to-child support continues to play an important role, the report shows that there are also significant financial flows from children to parents as well as between siblings. From the cost of care and housing to simply helping with ongoing bills, many older family members are grateful for any financial support they receive.
What’s next with families and money?
The Bank of Bro and Sis? Apparently, that is on the rise too, with a similar proportion of young adults providing financial support to siblings.
“It also works within generations too, with siblings now more commonly purchasing property together.”
What happens when times get tough and money is tight 👎?
“When times get tough, however, more traditional family roles prevail with the research showing that people are four times more likely to rely on their parents during financial hardship than on their children.”
The problem is, when it comes to those tough times and the informal intra-family loans that follow, we’re just not that great at paying it back.
Two-thirds of Britons have had to borrow money in the past 12 months, including 15 percent who borrow from a partner, 14 percent who borrow from parents, and 12 percent from siblings, compared with 20 percent who go to a bank for money, research from Likely Loans suggests.
Unfortunately, while 99 percent payback official loans, almost a quarter of family and friends never see their money – an average of £125 per loan – in full again.
At Offspring, we believe family conversations about money transfers, loans, repayment, and assets are an important part of how all of us can get ourselves money ready.
Should talking about money be difficult?
The hardest thing to do takes the least amount of effort. Just start talking!
For some useful tips we like what Financial Planner, Carl Richards says:
“Just. Talk. Talk about money. It’s that simple.
Do it often. Do it boldly. Do it with your spouse, with your children, with your parents. Do it even when it’s scary, challenging, or frustrating (but don’t forget the rules!).
The fact is, it’s hard to be intentional about what you do with your money when you never talk about it. Forget hard. It’s impossible. You need to talk about money.
But that’s okay because this is just like any other skill. The more you practice, the better you get. What’s the worst that can happen — you and your spouse learn a little more about one another?
The risks are small, but the rewards can be huge. So do me a favor, put on your “No Shame, No Blame” hat, schedule a time, and have a conversation about money!”