Social Justice

Here's who is most likely to get help from the 'bank of mum and dad'

If you're wondering how your peers are getting on the property ladder already, this new study may have the answers

A new report from the Institute for Fiscal Studies (IFS) has found £17 billion is gifted or loaned informally each year, mostly from parents to their adult children. Image: Shutterstock

Looking at your bank balance every month and wondering how people ever manage to afford to buy a home? Surprise, surprise: people are much more likely to get on the property ladder if they have wealthy parents who give them cash to top up their salaries.

A new report from the Institute for Fiscal Studies (IFS) has found £17 billion is gifted or loaned informally each year, mostly from parents to their adult children. More than half of this money (53 per cent) then goes towards buying a home or improving a property. 

As young people face rising house prices and stagnant income growth, the “bank of mum and dad” is becoming increasingly important. 

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The average – mean – amount people receive over an eight-year period of their early adulthood is around £6,500, while the median amount is £2,200. But people who put their money towards buying a house or making improvements to their home received an average of £20,000 from their family. 

This is deepening inequality among young people. Over half of gifts and loans are given by the wealthiest fifth of adults, who are almost exclusively homeowners and disproportionately living in London and the south-east.

The children of university-educated home-owning parents receive around six times more in gifts and loans during their 20s and early 30s than the children of renters.

Someone buying a home is two-and-a-half times more likely to have been given money than someone who is earning the same amount but has not bought a home. 

Young people who are in high-earning jobs also tend to get more from their parents. Over an eight-year period in early adulthood, the highest fifth of earners are over three times more likely to receive money than those in the lowest fifth. 

This is probably because the highest earners often come from wealthy families. Previous IFS research found that, by the time young adults are in their 30s, those with parents in the wealthiest fifth of their generation had an average wealth of £107,000. Those with parents in the poorest fifth had an average wealth of £18,000, by comparison. 

The amounts received by these high earners are 26 times bigger than those received by the lowest earners (averaging at £6,300 over eight years in comparison to £240). 

Those in the bottom wealth-third are more likely to use their gifts to buy cars, go on holidays and to pay off debts than their wealthier counterparts.

There are also racial disparities. One in 10 white young adults receive a gift in a two-year period, compared with just one in 25 Black African or Black Caribbean young adults, and less than one in 30 Pakistani or Bangladeshi young adults.

Bee Boileau, a research economist at the IFS, said: “Policymakers should keep in mind these transfers’ potential to pass on inequalities from one generation to the next.”

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