The bank of mum and dad exacerbates economic inequalities in early adulthood. Photo: PA / Alamy
Money transfers from parents to their children reach £14bn a year, but not every child receives the same amount – if any – as mum and dad’s banks fuel inequalities in the UK.
For example, the think tank Institute for Fiscal Studies states that white young adults are three times more likely to have received substantial gifts than Pakistani or Bangladeshi young adults.
Most transfers come from parents over the age of 50 to children in their late 20s and early 30s. About 30% of young adults receive at least one substantial transfer (of £500 or more) in an eight-year period.
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Children of university-educated home-owning parents receive almost six times as much in wealth transfers during their 20s and early 30s as children of renters.
Around £14 billion of gifts or loans are given informally each year, almost all by parents to their adult children. It mostly helps in buying a house or is given as a gift at the time of marriage.
B Boileau, a research economist and author of the IFS report, said: “When people – especially those with wealthy parents – are in early adulthood and are buying their first home or getting married, there is a substantial Intergenerational transfers do occur. While these transfers are of significant help to some, they are very unevenly spread.
The figures show that the richest would receive an average of £6,300, or 3% of their income over the same period, while the poorest would receive an average of £240, or 0.5% of their income over the same period.
Also, more than half of the value of transfers is paid by the wealthiest fifth of adults – almost exclusively home owners and disproportionately living in London and the South East.
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The study also showed that 1 in 10 white young adults is gifted over a two-year period, compared to 1 in 25 black African or black Caribbean young adults and less than 1 in 30 Pakistani or Bangladeshi young adults.
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Boileau added: “These transfers can provide benefits as well, so policymakers should take into account the potential for these transfers to pass on inequalities from one generation to the next.”
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Source: uk.finance.yahoo.com
