Bank of Mum and Dad: Should parents still pay for their adult children’s family holiday?

Many parents are also paying for their adult children's flights, meals out and activities. Photo / 123rf

THREE KEY FACTS:

• Two in five parents pay for their adult children to go away with them.
• More than half of under-35-year-olds who bought a home in 2023 received financial help.
• Once a parent makes a gift to their children, they start a seven-year clock where the gift will no longer be subject to inheritance tax.

OPINION

Just who are these so-called adults who let their ageing parents pay for their holidays each summer?

I’m not jealous, of course; simply surprised that, according to a study by Kent Reliance, more than two in five parents are not only stumping up for their adult children to go on holiday with them, but also paying for their flights, meals out and activities.

Quality time with the younger generation comes at a financial cost for these parents, but according to Louise Halliwell of Kent Reliance, it’s “one many tell us they are happy to bear”.

In the survey, 60% of parents say that the family holidays they paid for are the ones they look forward to most.

My children’s teacher, who is in her late 20s and off to Greece with her parents when term ends, jokes that “so long as they keep paying, I’ll keep coming”.

My parents have a house in France where we visit them each year, which as my husband points out, means I’m as guilty of taking parent-funded holidays as the next millennial, even if mine aren’t paying for extras such as flights or activities. My parents insist that they like holidaying with us as a family.

Then there is the whole business of mortgages. When they were cash-strapped parents of small children they had no help getting onto the property ladder. Yet they supported me through university and then my mother guaranteed my first mortgage.

From the moment I graduated, though, I was aware that “the Bank of Mum and Dad” was perhaps not closing completely, but certainly winding down.

My mother spelt it out: it was time to get a job. I slept on a mattress on a friend’s floor in London while I attended interviews and eventually found work. It was liberating not to be relying on my parents financially, although I still relied on them emotionally.

Should the Bank of Mum and Dad still be open into adulthood? Photo / 123rf

Now, though, the Bank of Mum and Dad seems to stay open indefinitely.

Parents remain close to their children into adulthood, says Claire Johnson, a solicitor who specialises in trusts, tax and estate planning for Clarke Willmott; adult children live at home for longer and remain financially dependent into their 20s due to rising living costs and sky-high property prices.

“Parents see it as a necessity to help them out,” she says.

Indeed, research by Legal and General shows that more than half of under 35-year-olds who bought a home in 2023 received financial help, supporting 318,000 property purchases, gifting an average of £25,600 ($53,380), while total Bank of Mum and Dad lending climbed to £8.1 billion ($16.89b), up 50% since 2020.

“Support from family is increasingly becoming a prerequisite for homeownership,” confirms Bernie Hickman, chief executive of Legal and General Retail.

Lulu Luckock, a family counsellor, admits that she’d like nothing more than to take her three adult children away on holiday and give them each a deposit for a house. She believes, though, that parents who cannot afford to help shouldn’t reprimand themselves; there are many benefits to encouraging adult children to stand on their own two feet.

“Money comes with baggage, there’s no getting away from it,” she says. “If your parents are still paying for family holidays when you’re 35, you have to fall in line.”

When I joke that I’d happily fall in line for a week on a Greek island, Luckock points out that my husband might not enjoy it so much. “It’s no fun if you’re the daughter or son-in-law who has to kowtow to parents who are footing the bill,” she says.

Charlotte Riggle*, whose in-laws pay for summer holidays in Ibiza and skiing in Austria for her, her husband and their three children each year, agrees with Luckock.

“At risk of sounding spoiled, I’d rather have a rainy holiday in the UK alone with my husband and the kids,” she says. “My mother-in-law has so much power because she and my father-in-law are paying. They get to specify the dates, the location, who else is there, even what we’re ordering at dinner and there’s nothing we can say.”

Riggle’s in-laws also pay for their children’s school fees and made a hefty contribution towards their family home in South West London, which according to Johnson is what an increasing number of parents are doing, although she advises families considering it to take legal advice.

“A financial gift is exposed in the event of a relationship breakdown, although a pre or post-nuptial agreement with any spouse or partner can ringfence family gifts,” she says. “In our experience, parents are increasingly encouraging or even insisting upon this ahead of gifting.”

About 60% of parents say that the family holidays they paid for are the ones they look forward to most. Photo / 123rf

Lucy Smithe* from Devon has also found the Bank of Mum and Dad is a divisive institution.

She has been forced to decline her parents’ offers of holidays and help with property purchases and school fees as her husband finds their assistance stifling. His own parents are dead and he wants to forge his own path, even if it means being less comfortable.

“He likes to speak his mind and do things his way; I find I’m caught in the crossfire,” Lucy says. “My parents only want to take the pressure off and they like treating us. Their heart is wholly in the right place.”

Luckock believes Lucy is right to listen to her husband, rather than side with her parents. Families need to create their own identities and parent in their own style: it’s hard to do this if you’re being financially infantilised by wealthy parents.

Johnson agrees that while some parents use money to control their children, for the most part, they are simply doing what they can to help them out. Holidays and deposits for flats are easy ways to drastically improve their children’s quality of life, she says.

There are also inheritance tax benefits to keeping the Bank of Mum and Dad open for longer. Once you make a gift to your children, you start a seven-year clock after which the gift will no longer be subject to inheritance tax.

Lucy says this is a major incentive for her parents. “They worked very hard. They’d rather see the fruits of their labours being enjoyed and benefitting their grandchildren,” she says.

As the Bank of Mum and Dad becomes a cultural norm, Johnson worries that there will be some parents who will overstretch themselves to support their children. She has clients who live as frugally as possible to get their children on the property ladder.

“They’re so focused on helping their child to secure a property that they don’t necessarily take the right financial planning advice for themselves,” she says. Hickman agrees: “By dipping into savings and pensions, family members may be compromising their own financial future”.

Parents can focus on supporting their children by listening to them, encouraging them, or offering them somewhere to stay for a while. Photo / 123rf

Rather than bankrupting yourself over your children’s finances, Luckock suggests parents focus on supporting them in other ways – listen to them; encourage them; offer them somewhere to stay for a while if need be. “You can’t put a price on financial independence,” she says. “Over-parenting can be disabling, not enabling.”

She urges those families who do decide to gift money and holidays to adult children, however, to prioritise fairness and transparency. In her clinic, she’s found that parents treating children differently can cause unhappiness and disputes that continue through the generations.

Thus, if you do decide to fly your daughter and her family to the Maldives this Christmas, be sure to invite your son, too.

*Names have been changed