Parents get tough on kids with stricter lending criteria
Teenagers looking forward to six weeks of summer fun funded by their parents could be in for a big shock. New research* from AXA reveals that The Bank of Mum and Dad has been forced to cut back spending on children and in some cases ditch free hand-outs altogether.
As the credit crunch bites, parents are introducing stricter lending criteria and encouraging their kids to save, the research shows.
AXA says that around five million parents (38%) have taken measures to combat tough times with the result that children are now feeling the effects of the economic downturn.
According to AXA some 2.2 million parents (17%) have curbed their children’s spending by reducing the amount of cash they hand out or by cutting their kids’ allowance completely in the past six months.
A further 21 per cent of parents – around 2.8 million people – claim to have encouraged saving, possibly in an effort to improve liquidity and reduce exposure to one-off demands for expensive items.
Teenage customers of the Bank of Mum and Dad are most at risk of being refused access to lending facilities, according to AXA. One in ten parents of 16-18 year olds say they have stopped lending money to their children altogether. However it is those aged between 11-15 years that are most likely to have their requests for credit turned down – one in six (17%) parents of 11-15 year olds say they have cut the amount of cash available for purchases outside of their children’s normal allowance.
But according to AXA it is 17 year olds that could face the leanest of summers, with a significant proportion used to receiving large handouts from parents. One in twenty 17 year olds (5%) typically receives between £100 and £200 a month from their parents** and AXA predicts that those approaching university or their first job are therefore most likely to miss their regular allowance if it is withdrawn by cash-strapped Mum and Dad.
Alison Green of AXA said: "The Bank of Mum and Dad has so far been quiet on the issue of how it will deal with the effects of the credit crunch. But now it has come out and shown teenagers have been hit hard."
"Over half of the teenagers we polled said their parents give them money if they run out and one in five knows they will get what they want if they are persistent enough. So there are plenty of young people who have got used to getting what they want, when they want it."
"But all that may change as parents find their finances stretched to breaking point for the first time in years. Parents are getting tough and kids are not going to like it."
Younger parents and those approaching retirement are most likely to cut spending on their children, with almost two thirds (63 per cent) of 18-24 year old parents and two thirds (66 per cent) of 55-64 year old parents say they have had to change the way they hand out money to children over the past six months.
* ICM Research interviewed a representative sample of 2,050 GB adults between 2nd – 4th May 2008. 583 were parents.
** ICM Research interviewed a representative sample of 200 children aged between 15 and 17 between 2nd and 8th May 2008