Fortysomethings still bank on parents

Generous parents are extending financial support for their children well beyond school and university.

They hand out thousands of pounds to help their offspring buy homes and cars, pushing the age of financial independence further and further into adulthood and sometimes into middle age.

People in their 40s are commonly still accepting handouts from their parents, a survey reveals.

One in four parents said they either already provided or intend to provide a financial safety net for their adult offspring.

The children of rich parents are most likely to benefit, either from cash gifts or from regular allowances - effectively pocket money for adults. But the trend is growing across the classes.

Recent surveys have suggested that young adults stay at the family home until much later in life than earlier generations.

When they do finally flee the nest, the parents effectively pay for them to do so, with cash for homes, cars or holidays. The study, published today by LloydsTSB, says: 'It would seem regardless of wealth, the nation is doing more than just dipping into their parental pockets for one- off purchases such as property or cars.

'The majority are helping on an ongoing financial basis to aid with day to day living.'

The bank's UK Wealth Watch report says: 'Giving one-off gifts of money, whether it is for a birthday or a quick tenner in the pocket to help buy a few drinks, is also a popular habit among parents throughout the UK.

'Two thirds of the rich have given their children money occasionally but despite being less well-off, the population in general are more generous in terms of occasional gifts. Eight out of ten said they did this.'

A rise in parental help for homebuying is thought to have been a factor in the property boom of recent years.

'Helping to buy property by giving money towards it was cited by the whole population as a key way of assisting their offspring.'

One in five of the general population viewed offering cash for a house deposit as important, while the figure rose to 37 per cent among the wealthy.

One in four adults saw helping with the purchase of a car as important, rising to almost half among well-off parents.

One in three thought handouts to fund holidays or world trips were important, rising to a half among wealthy parents.

The bank defines the wealthy as those earning more than £100,000 a year or with liquid assets of more than £250,000.

The report concludes: 'Coming of age now no longer coincides with cutting the parental purse strings and, in some cases, parents are expecting an active financial role in their children's lives well into middle age.'

The study also revealed a stark lack of understanding of inheritance tax and duty on gifts.

Less than half (44 per cent) of the wealthy were aware that up to £3,000 a year could be gifted to their children tax-free, while nearly a quarter (24 per cent) were unaware of the current inheritance tax rate of 40 per cent.

Director of LloydsTSB Private Banking, Mark Cheshire, said: 'Now, more than ever, careful financial planning is crucial if parents are to pass on their money to their children and not the tax man.'