Yahoo Finance Bank of mum and dad handing out £17bn each year
Money transfers from parents to their children reach £17bn per year but not every kid will receive the same amount – if any – as the bank of mum and dad drives inequalities in the UK.
White young adults are three times more likely to receive a substantial gift than Pakistani or Bangladeshi young adults, for instance, think tank Institute for Fiscal Studies has said.
Most transfers come from parents aged over 50 to children in their late 20s and early 30s. Around 30% of young adults receive at least one substantial transfer (of £500 or more) over any eight-year period.
Read more: UK house prices and sales continue to fall as interest rates rise
The children of university-educated homeowning parents receive around six times more in wealth transfers during their 20s and early 30s than the children of renters.
Around £14bn is gifted and £3bn is loaned informally each year, totalling £17bn, from parents to their adult children. This mostly helps with buying a house or is gifted at the point of marriage.
Bee Boileau, a research economist and author of the report from the IFS, said: “Substantial intergenerational transfers happen when people – particularly those with richer parents – are in early adulthood and are buying their first home or getting married. While these transfers are important assistance for some, they are very unequally spread.”
The figures show that the richest will receive an average of £6,300, or 3% of their income over the same period, while the poorest will receive an average of £240, or 0.5% of their income over the same period.
Also, over half of the value of transfers is given by the wealthiest fifth of adults – almost exclusively homeowners and disproportionately living in London and the South East.
Read more: UK house prices drop more than £12k since August
The study also showed that 1 in 10 white young adults receive a gift in a two-year period, compared with 1 in 25 black African or black Caribbean young adults, and less than 1 in 30 Pakistani or Bangladeshi young adults.
Boileau said: “As well as the benefits these transfers can provide, policymakers should therefore keep in mind these transfers’ potential to pass on inequalities from one generation to the next.”
Watch: How much money do I need to buy a house?
Download the Yahoo Finance app, available for Apple and Android.
