Debt risk may rise as family lending increases

Parents may find themselves more at risk of suffering debt problems if they run into sudden financial difficulties than their incomes might suggest due to the amounts they lend to their children.

Research by Scottish Widows has revealed the amount of money lent by family members to children and grandchildren has risen by 31 per cent in the past five years, at an average of £12,846.

While such sums may be needed to help pay for costs like getting on the housing ladder or paying for university fees, the result for many adults could be a lack of savings as cash they could have put away is lent out.

And this could cause debt because a sudden crisis could leave parents and grandparents needing to borrow cash instead of being able to fall back on savings. 

The survey showed that a quarter of parents with children under the age of 16 have no savings, as do a quarter of Britons aged 35-44, suggesting a clear correlation.

A recent survey by MoneySupermarket.com revealed 47 per cent of Britons have either stopped saving or greatly reduced the amount they put away in the last year. 

By Joe White