A recent study has uncovered a staggering debt owed by British children to their parents, totaling over £13 billion. Researchers found that more than a quarter of financially-strained Brits have turned to their parents for loans in the past year, due to bad or non-existent credit scores and difficulty obtaining loan approvals or credit cards.
The study, conducted among 2,000 participants, revealed that 24% of individuals aged 18 to 50 have borrowed an average of £2,432 from their parents. However, despite these borrowings, they still owe an average of £1,998 to their parents to this day.
The cumulative outstanding amount has left parents across the UK facing a collective deficit of £13,184,258,544. While these loans may provide immediate relief, concerns have been raised about the potential long-term financial disadvantage faced by the children. A quarter of borrowers expressed worries that relying on their parents for loans may hinder their ability to build their own credit scores and financial histories.
Many adult children in the UK are finding it challenging to obtain credit due to their limited credit history. Relying on parental loans may provide a temporary solution, but it does not contribute to establishing an independent financial record.
The study revealed that the average adult borrows £4,835 from their parents over their lifetime. The most common reason for seeking parental assistance was to meet day-to-day living expenses. Other common reasons included buying a new car and coping with job loss. Additional motives for borrowing included raising funds for a house deposit, covering emergency expenses like boiler or car breakdowns, and paying off existing debts.
Feelings of guilt were prevalent among the borrowers, with 56% admitting to such sentiments. Moreover, 73% of respondents expressed determination to repay their parents promptly, aiming to eliminate any lingering debt that may strain their relationships.
Interestingly, nearly one in ten borrowers reported being turned down by their parents when requesting a loan, and 14% anticipated facing the same response in the future. Reasons cited for the refusal included parents wanting their children to become financially independent (42%) and the belief that children should establish their own credit scores through official credit channels (17%). However, for 28% of parents, the inability to part with further funds was the primary reason for denial.
The study also revealed another aspect of the financial relationship between parents and children. Approximately 26% of parents took out credit agreements in their own name to help their children overcome their bad credit scores or excessive existing debt, such as mobile phone contracts. Additionally, 20% admitted that their parents had paid bills on their behalf, amounting to an average of £354.86 over the past year.
The findings highlight the significant financial reliance of British children on their parents and the potential implications for their future financial independence. As the study suggests, it is crucial for individuals to establish their own credit history and financial stability to ensure long-term financial well-being.