From BOMAD to ‘bank of son and daughter’ – the sandwich generation financially supporting their adult children and their ageing parents

Latest Saltus Wealth Index reveals HNWIs are stepping into the role of ‘bank of mum and dad’ (BOMAD) and ‘bank of ‘son and daughter’ (BOSAD) as their families struggle with rising costs

• Seven in ten (73%) high net worth parents are financially supporting adult children, while more than two thirds (68%) are helping their ageing parents or grandparents
• One in eight (12%) are financially supporting both generations, often at the expense of their own financial goals
• Top reasons for supporting adult children include house deposits and car purchases, while those supporting older generations are typically helping with day-to-day costs
• The average level of support stands at £7,500 a year, but almost one in five (18%) gifted more than £10,000 in the past 12 months
• One in eight (12%) are even dipping into or cutting back on pension contributions to fund this support, while a third (31%) are selling investments

High net worth individuals (HNWIs) in the UK are increasingly propping up multiple generations of their families, placing significant pressure on their own financial wellbeing, according to the latest Saltus Wealth Index Report.

Wealth management firm Saltus surveyed 2,000 people with assets of £250,000 or more, and discovered a growing number of HNWIs are providing both downward and upward financial support, often at the expense of their own financial goals.

The report reveals that almost three quarters (73%) of HNW parents are providing financial support to adult children, two thirds (68%) are supporting their own ageing parents or grandparents and as many as one in eight (12%) are doing both.

The findings mark the emergence of what Saltus is calling the ‘bank of son and daughter’ (BOSAD), where grown-up children are now supporting elderly parents, reversing the traditional flow of intergenerational support. This new trend comes on top of the well-documented ‘bank of mum and dad’ (BOMAD) and places HNWIs at the heart of an increasingly complex financial balancing act.

The Report shows that while 42% of HNWIs are managing to fund the support through excess income, a third (31%) have had to sell or use investments and 18% have cut back on lifestyle spending. One in seven (14%) admit they have had to restructure their finances completely, while one in eight (12%) say they are sacrificing their pensions by either dipping into their pots or reducing their contributions.

The top reasons for supporting adult children include house deposits (23%), car purchases (19%) and day-to-day bills (15%), while shopping (45%), utility bills (43%) and rent or mortgage payments (26%) are the most common ways HNWIs are helping their own parents. Medical expenses are also a common expense – 19% have paid for a parent to have a one off medical procedure while 24% have funded private mental health treatment.

Almost one in five (18%) of those supporting family have gifted more than £10,000 in the past year (more than half of those, and 7% overall, have given more than £15,000) while the average sum gifted is £7,500.

Luca James, 38, is also providing financial support for older relatives. He said: “I provide financial support for my parents and a disabled relative, and I have contributed over £15,000 in the past year. It’s an ongoing commitment, and while it can be tough at times, it gives me a sense of fulfilment knowing that I’m doing my best to help someone in need. Of course, it requires sacrifices but knowing that I’m making a difference makes it worthwhile.”

Sean Graham, who is newly retired, helped his adult son onto the housing ladder. He said: “Our son is 25 and he moved out last April to buy a house with his girlfriend, who is the same age.

While they both work full-time, they are not on great wages,” explains Sean, “so we facilitated the move entirely and help wherever we can currently.”

Mike Stimpson, Partner at wealth management firm Saltus, said: “The data reveal a remarkable insight into how wealth is flowing through families. The traditional ‘bank of mum and dad’ model is now matched by a rising trend of adult children stepping in to support their parents as the ‘bank of son and daughter’.

“This growing financial squeeze is changing priorities and prompting many to make personal sacrifices. The government is asking a lot of people who have worked hard to establish themselves. They are often key to funding business growth, providing seed capital and creating jobs – if they are forced to choose between supporting their families and investing in the future, there could be implications for the wider economy through reduced investment, pension saving and wider spending.”

To access the full Saltus Wealth Index Report, visit www.saltus.co.uk/wealth-index