A recent report launched by Friends Life finds that the combination of the recession and spending cuts has brought about profound changes in the way in which generations within families support each other.
This information comes to the fore as 44 tax and benefits changes are introduced which could wipe billions off household incomes over the next year.
Rather than finding the traditional “sandwich generation” model, the ‘The Coping Classes’ report finds middle income households increasingly relying on their retired parents for financial support, while remaining more committed than wealthier or less well off households to helping their children financially.
- 40% of middle income or ‘Coping Class’ households are turning to their retired parents for help in the face of unique and unprecedented financial pressures.
- 57% of middle income parents help or expect to help their children to buy a house, compared to just 33% of other parents (who ranked help with getting married highest).
- The recession has left over half (59%) of the Coping Classes unable to provide for themselves and their families for longer than six months if they lost their main source of income.
Fuelled by the fear that over half of people unemployed in the UK have been so for over six months (52%), this group is now putting a series of coping mechanisms in place to stave off the threat of a potential financial survival gap, including:
- Radically changing their attitude towards debt: 84% of the Coping Classes say they are committed to avoiding taking on more debt this year, and nearly three-quarters are putting plans in place to pay off most of their debt within ten years.
- A renewed commitment to retirement funding: Almost half of the Coping Class identify saving for retirement or for a rainy day as the main reason for saving compared to the rest of the adult population who put saving for a holiday or travel top of the list. Nearly 60% of the Coping Classes believe it is more important than ever before to invest in a pension.
- The Aleksandr Effect: the Coping Classes lead the way in shopping around for the best deal. Encouraged by the nation’s favourite meerkat, 70% of them use price comparison websites (compared to just 61% of other adults). According to the report, this has created an emerging social kudos attached to getting the best deal, with more than one in four of the Coping Classes claiming people go to them for financial advice as a result of their savvy approach.
- Looking after the pennies: overall there has been a 20% increase over the last two years in the number of households who say they are ‘carefully budgeting’ their household spending, with 95% of those that do budget maintaining that they adhere strictly to their budget plan
Comments on the findings from David Hynam, Director of Operations at Friends Life:“The recession has forced the Coping Classes to abandon their role as the ‘sandwich generation’, providing financial support to both their grown up kids and their retired parents. Many are now finding that it’s their parents – typically retired baby boomers who may have escaped the worst effects of the downturn and government cuts – who are helping them out.”
“Despite relying on their retired parents to act as a financial buffer, the Coping Classes are still committed to helping their own children but it’s now all about hand ups, not hand outs. What we’re seeing emerging – fuelled by the recession – is a new model of downward assistance, with each generation giving a leg-up to the one below. Practical parenting is taking on a whole new meaning, extending beyond those first few formative years to a whole-life role.”
“Five years ago the Coping Classes were comfortably off, but the recession and the effects of public spending cuts seemingly tilted against them has changed their status. We’re now seeing them take clear, decisive and urgent steps to address this.”
“Most striking is the new attitude towards debt. We’re witnessing a slow march down the debt mountain, which will have huge implications for financial planning and for the financial services industry.”
My thanks to the people who sent me this information.
Most of use live in our own little worlds and even friends don’t usually talk about money so it really makes a difference when we see the bigger picture and realise the situation a lot of people are in.