The rise of the 'greyday' loan
'Neither a borrower nor a lender be,' as Polonius famously advised his son Laertes in Shakespeare's Hamlet, written in 1602. And for nearly 400 years - right up until my grandparents' generation - the same mantra has largely applied.
But things are changing. The relatively recent availability of credit, coupled with one of the worst economic downturns in history, has meant that my age group - 20 and 30-somethings, and even older - are knocking on the doors of our thrifty grandparents, cap in hand, asking for help.
State of the generations
According to recent research from MoneySupermarket, a collective 1.7million grandparents and parents are being forced into the red themselves as a direct result of trying to plug the financial gap for their adult grandchildren and children.
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Drilling down to the figures, the survey found that (24%) of grandparents of grand-'children' aged over 18 are helping to support them financially. A further 32% of parents with adult children are also still a major source of financial assistance to their offspring.
Worryingly, the reason for this is not a once-in-a-lifetime cash injection such as a deposit for a home, wedding or even first car. In fact, the bulk of the financial support from parents and grandparents (58% and 41% respectively) is to help with the general cost of living. Next was funding education (34% and 23%) followed by simply 'helping with debts' (25% and 14%).
Where the money goes
As a result of providing financial support, over 46% of parents and grandparents were forced to dip into their life savings. But more worrying is that 14% turned to credit cards, while a further 14% were pushed into using their overdraft.
Unsurprisingly, this has impacted the senior generations' financial goals, with 33% claiming they've not been able to save as much as they wanted to. Nearly a fifth (18%) still carries outstanding debt which they cannot pay off. The average amount of debt - over and above any mortgage - held by grandparents and parents as a direct result of helping their offspring and offspring once removed is a considerable £3,513.
Kevin Mountford, head of banking at MoneySupermarket commented: "Parents and grandparents have traditionally provided financial support towards their children's' life goals, but with the nation's wallets pushed to the limits, it is clear this support has grown significantly.
"Many parents and grandparents who provide monetary help are finding their own financial situation being pushed to the limit, with some taking on additional debt or stopping saving to help their nearest and dearest."
But, while offering support to family members may seem like an honourable thing to do, Mountford says people need to consider how they will repay the debt and how this will impact their lifestyle, especially if they are in or approaching retirement. He added: "The ability to consolidate those debts onto a loan or credit card could be limited, especially when your income may fall."
Times are tough enough for pensioners
And things are tough for pensioners as it is. Even though the Consumer Prices Index (CPI) measure of inflation fell this week from 3.5% to 3% it is still the over 65s who are suffering most, according to Vince Smith-Hughes at the Prudential.
"Pensioners are typically the hardest hit of all consumers by inflation," he said. This is because, compared with the majority of people, they spend a much higher proportion of their income on the goods and services that have the fastest rising prices, such as food and fuel."
The economy is even taking its toll on their longer-term investments too. The value of pensions has been decimated in recent years and savings returns remain stubbornly low, and even property
values are volatile.
According to the Key Retirement Solutions' Pensioner Property Equity Index published this week, homeowners aged 65 and over have lost £6.38billion in the past three months off the value of their homes - equivalent to around £1,595 each - as the housing market coughs and splutters its way through the year.
Help yourself for nothing
But the good news is, there are measures we can take to reduce the impact of our financial burdens on the family - for example, not paying over the odds for major expenses such as motor and home insurance, energy and other household bills.
Shop around for the cheapest deal in all these camps at a comparison website such as MoneySupermarket. And while you are at it, make sure you are benefiting from the lowest mortgage rates and savings rates too.
Planning your finances for when you, yourself are old and grey is also crucial. Scottish Widows' latest annual UK pensions report revealed that fewer than half (46%) of us are making enough provision for retirement - a figure which represents an all-time low over the survey's eight-year lifespan.
But according to the Pensions Advisory Service, you should be saving at least half of your age into a pension pot for a decent retirement. For example, if you are 30 you will need to save 15% of income, if you are 40 you'll need to save 20% and so on.
Neither a borrower nor a lender be...
In the meantime, at least we can all take a leaf from our grandparents' book of thrift. Guy Simmonds, head of product for protection and investment at Nationwide Building Society, said: "The baby boomer generation who had to contend with post-war rationing and austerity can teach us all a few lessons in how to save, mend and make do. After all, this is likely to be the last generation to retire with a decent savings pot behind them."
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