2008
(11/07/2008) Teenagers set to feel the pinch as credit crunch hits 'Bank of Mum and Dad'
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 research1 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 parents2 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that those approaching university or their first job are therefore most likely to miss their regular allowance if it is withdrawn by cash-strapped Mum and Dad.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.
- Ends -
Notes to editors
- 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
The AXA Financial Task Force
This research forms part of the work being undertaken by the AXA Financial Task Force, which is made up primarily of psychologists, economists and industry experts from AXA, which is looking into the how key financial issues are affecting Middle Britain.. Over the coming months it will be trying to gain a level of understanding of precisely how housing issues; savings rates and pension contributions; debts and dependency on credit; and financial apathy are all impacting on this group.
AXA work on financial education
AXA has been at the forefront of financial education for over three years. It is committed to exploring what the financial problems of the nation really are, and how we might best motivate individuals to solve them.
- AXA Avenue
AXA's year long financial social experiment ran from October 2005 to October 2006 using 20 households in Brighton. Half of the households were given access to independent financial advice while the other half were left to their own devices.
The findings revealed that the ten households that received financial advice were collectively £50,000 better off at the end of the experiment, with massive savings increases and encouraging levels of debt reduction. And the participants were able to make these savings by spending just one hour a month on their finances. In contrast, the households left to their own devices actually got collectively poorer. They frittered away a quarter of their savings and the group saw a three per cent reduction in their net wealth.
- My Budget Day
The AXA My Budget Day campaign was designed to encourage and motivate all individuals to spend an hour a month on financial planning, regardless of their financial circumstances. AXA worked with the CBI, Unite and other business leaders to encourage UK plc to give all employees an hour off work to spend on their finances. It is estimated that around 250,000 employees took part in My Budget Day on 21st November 2007. The website, www.axa.co.uk/mybudgetday, provides all the tools and information to help individuals to kick-start the financial planning habit.
- Decision Technology research
AXA recently published the results of a financial research programme undertaken by Decision Technology, the experimental psychology specialists at the University of Warwick and University College London. The research explored how the financial community can best motivate individuals to convert their good intentions into action when it comes to addressing their personal finances.
For more information please contact:
| Citigate Dewe Rogerson | Billy Partridge 020 7282 2863 |
| Holly Clark 020 7282 2917 | |
| AXA | Sandra McLaughlin 020 7920 5131 |
About AXA
AXA is a world leader in financial protection and wealth management, with major operations in Western Europe, North America and the Asia/Pacific area. AXA services 50 million customers throughout the world (individuals and businesses). In total, the AXA Group has approximately 110,000 employees and distributors worldwide, working in around 50 countries. AXA UK, a wholly owned subsidiary, operates in the UK and Ireland, and occupies leading positions in its main markets: life & pensions, health insurance and general insurance. AXA UK has been actively involved in the thinking around financial capability and generic financial advice, in particular through the AXA Avenue study which identified the positive impact on consumers of receiving financial advice.