Bank of Mum and Dad

I was fascinated and a little perturbed to read an article in today's Daily Telegraph about the number of 18 - 30 year olds who rely heavily on their parents for financial help and also for simple decision-making [Recession has turned ‘Blair’s children’ into a ‘Peter Pan generation’(Daily Telegraph, 6th May 2013)]. Although it can't be surprising that Generation X need financial support to get on the housing ladder, or help to put down a deposit on a rental property, not having the ability to take responsibility for other areas of their life is actually quite worrying.

In their book The Millionaire Next Door: The Surprising Secrets of America's Wealthy (1996) Thomas J. Stanley and William D. Danko expose the truth about the way that self-made millionaires run their lives. Far from having lavish lifestyles and buying expensive cars, or indulging in goods of ostentation (always wanted to put that word in my blog), these PAWs (prodigious accumulators of wealth) save regularly, invest consistently and never spend more than they earn. This allows them to make the most of the spare cash they do have in building something for the future (something more than bricks and mortar perhaps)! Amongst the many traits of the individuals studied was the willingness to suffer hardship, discomfort and poverty in order to remain fully independent adults and NOT rely on the bank of mum and dad for handouts - EVER. This built a determination in these self-made millionaires to be economically independent, come what may, and to be enterprising and frugal. Over time, their approach paid off and they ended up being very rich indeed.

The authors discuss the growing tendency of parents in America to fund their adult children almost continually even after they have left home, calling it  'Economic Outpatient Care', by giving gifts of money and offering financial support. The authors' research clearly demonstrates how this affects those on the receiving end of EOC. The authors discuss the impact of this ongoing 'drip, drip, drip' effect of monetary gifts, and expose the problems that it is storing up for America's future economy.

Before I tell you the results, which of these statements do you think most closely describes the most common effect of EOC on the adult children who receive these monetary gifts?

1. As a result of the financial assistance, the offspring become completely financially independent, thus taking responsibility for their lives and demonstrating much greater enterprise so they are not reliant upon anyone for further help.

2. As a result of the financial assistance, the offspring become slowly more and more accustomed to 'hand-outs' (willingly or begrudgingly given by parents) and less likely to ever take full responsibility for managing their finances - indeed eventually seeing it as a necessity.

3. As a result of financial assistance, the offspring themselves become generous with others, and utilise the financial support from their parents to enable them to become philanthropic and charitable for the good of the wider community.

So - which one do you think MOST closely describes the MOST common effect of economic outpatient care? 

The answer is number 2. In fact over time, offspring who receive EOC seem to be unable to function without it. They become dependent on the extra financial help from their parents, and never take responsibility for their own finances! [It would be great if the answer was number 3, however this is the least likely outcome as these offspring actually become more profligate over time and completely unable to stick to a budget. Therefore giving to someone else is usually out of the question].

The article in The Telegraph would seem to bear this out - that parents are unable to raise their children to be independent (perhaps they secretly don't want them to be) and to take responsibility for their lives (a much more worrying trend).  Clearly this situation has massive implications for families across the country. And of course, in part it all depends what kind of society and families we want to have. I however, want to raise children who are proud of their own achievements, determined to be responsible and independent. I don't want them to be reliant on us as parents to prop them up when they experience hard times, and in so doing I am hopeful that they will be more successful than us! You have probably heard the wise saying 'necessity is the mother of invention' and surely your own life bears testimony to great results borne out of testing times.

We need to trust that we have raised our children to be resourceful, intelligent and able - what we must NOT do is remove from them the other key ingredient that will fuel their success - motivation!