Major changes are transforming the socio-economic dynamics of our society. Up to some decades ago it was common for ageing parents to be supported financially by their children who through better education and well paid jobs contributed to secure a better quality of life for their parents.
Many argue that this inter-generation solidarity was also the consequence of the importance given to the concept of the extended family a few decades ago – a concept that is apparently losing some of its importance.
But recent studies published in the UK seem to reveal that the bridging of the generations gap is still an important reality today – even if the roles of parents and children may be changing. A study by the UK’s Post Office, that also offers some banking services to middle class and working families, confirms that the parent-offspring role in providing financial support to prop up lifestyles is still very evident.
The Post Office study, for instance, found that in the UK parents and grandparents spent €1,200 supporting grown-up children and grandchildren in 2015. This research study also concluded that parents and grandparents go to “worrying lengths to financially prop up younger family members”.
The most common justification for this support was the payment of day-to-day living expenses, even if less essential requirements like contributions towards holidays also feature in the older generations’ list of priorities for their younger family members. Perhaps even more interesting is that older people have to dip into their hard-earned savings to finance this support and in most cases they do not expect to be paid back.
Longer lifespans may see those in their 60s facing triple pressures of continuing to work as the state pension age rises
It is, of course, too tempting to stereotype this parent-offspring generation support role. Many parents in their 50s and 60s are still struggling to preserve a decent quality of life in their retirement. The Post Office report reveals that “30 per cent of parents had sacrificed putting money into their own savings to help their children or grandchildren, while seven per cent chose to forgo making contributions to their pension pot”.
These findings certainly challenge the often-held misconception that today’s society has relegated family solidarity to a very low place in its list of priorities.
Henk Van Hulle, an official of Post Office Money Savings, says: “We understand that parents feel it is their duty to provide financial support for their struggling children, but it’s also important that they don’t sacrifice their own financial stability.”
Inflation may be under control at present but the cost of living is still high and, with wages stagnant, coping with the costs of raising a family remains a formidable challenge. A study published by the Centre for Economics and Business Research found that the cost of raising a child born in 2016 to the age of 21 is €300,000.
The ‘bank of grandma and granddad’ is a very convenient source of financing for parents who are not earning enough to cover these hefty costs. No wonder couples in their 50s risk missing out on the comfortable retirement they had envisaged.
One consequence of these changing socio-economic dynamics is that the majority of parents and grandparents are today less likely to leave a generous inheritance pot as they prefer to spend money on younger generations when they need it rather than leave it as an inheritance.
There is little doubt that today it is much harder for younger people to get on the property ladder without support from their parents and grandparents. Things become more complex when grand-parents are the main source of support for grandchildren.
People in their 50s may find themselves in financial difficulty if they are relying on an inheritance to fund their retirement. Many are undoubtedly underestimating the cost of caring for themselves or for their parents as they get older.
A study by the Social Market Foundation think-tank makes a very sobering conclusion: it warns that “longer lifespans may see those in their 60s facing triple pressures of continuing to work as the state pension age rises, caring for an elderly parent and providing grandparental childcare”.
This study goes further and concludes that “research shows just how important support across the generations is to the modern family, whether that is financial support, living together or providing care to the old and the young”.
Governments would do well to understand these informal networks and obligations within the wider family when defining policy on care, housing and financial services.
johncasarwhite@yahoo.com