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Are you in debt to the Bank of Mum & Dad?

Are you in debt to the Bank of Mum & Dad?

Category: Debt

Updated: 11/05/2016
First Published: 11/05/2016

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

At some point or another we've probably all found ourselves in a bit of a financial pickle, and what better way to get out of it than to turn to the benevolent Bank of Mum & Dad? However, while this loving financial institution may be willing to tide you over in the short term, it's important to tackle the root cause of the debt to get back on a sure financial footing - but it seems that few of us are actually taking steps to get help.

Dependence on the parents

Research carried out by 118 118 Money has revealed that a staggering number of UK adults aged between 25 and 44 rely on their parents for funding, with 54% of those questioned admitting to borrowing from the Bank of Mum & Dad. This borrowing can also be quite substantial, with an average of £3032.97 being dished out by doting parents.

Financial commitments seem to be a main motivator to resorting to a loan of this sort, with 41% of respondents saying that they need the money for this reason. Indeed, 28% cited their credit card bills as a specific worry, and considering that 25% of respondents in this survey have between two to five years worth of non-mortgage related debt, it's unsurprising that many turn a pleading eye to their parents for aid. The research also revealed that mortgage repayments were another financial commitment that sent this age group running to the Bank of Mum & Dad, with 22% saying that they worried about being able to make their repayments.

Clearly, this age group is under significant pressure with a stressful amount of debt, but despite this, few have taken steps to try and dig themselves out of their financial hole - indeed, 70% of respondents confessed that they had not sought any advice on managing their debts, which spells bad news for parents who are hoping for repayment.

"As with any increase in borrowing, it's important to look at the reasons and start tackling the financial gaps that people are facing," commented Chris Gillespie of 118 118 Money. "The only way to break this spiral of debt is to help those affected to budget so they can save for their own futures."

Getting back in the black

If you're struggling to make ends meet, don't be afraid to ask for help. Make sure you talk to those you owe money to and see if you can work out a more affordable repayment plan that will gradually erase your debt.

To make things more clear-cut, you may find it easier to consolidate all your debts with a personal loan. The handy thing about personal loans is that the repayment plan will help ensure that the entire debt is cleared by the time the term comes to an end. You can search the best personal loans with our best buys.

Alternatively, you may want to investigate 0% interest balance transfer cards. These cards will allow you to consolidate your existing credit card debt without interest adding to the bill for a set term. However, it is imperative that you clear the debt by the time the interest-free offer comes to an end, otherwise you will be charged interest and your debt will be harder to clear. To prevent this, simply divide your debt by the number of interest-free months, and this will reveal how much you need to pay back each month in order to clear the debt by the end of the introductory offer. Search our balance transfer charts to get started.

Making and sticking to a budget will also help you to get out of the red and stay in the black. Take a good look at all of your in-goings and out-goings and see where you can make savings - you may be surprised! Keep a close eye on your suppliers, too. If you think you can get a cheaper deal elsewhere, then search the market and switch!

Once you are back on firm financial ground, keep to your budget. This way, you will have a little left over at the end of the month, which can then be used to create an emergency buffer. "Saving small amounts may seem fruitless at first," adds Chris, "but the pennies will soon add up to pounds". So, once you start generating a little savings pot, make it work as hard as possible by finding a competitive savings account. An easy access account is probably best for emergency savings, as they require no notice to access funds. You can check out our savings best buy tables to see if there is an account that suits you.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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