A study by wealth manager Saltus for its Saltus Wealth Index Report found widespread examples of older generations supporting younger family members.

Support included help with mortgage payments, energy bills, holidays and educational costs.

Saltus surveyed 2,000 people in the UK with investable assets of £250,000 or more and found that the majority (74%) were providing financial support for either their adult children, adult grandchildren or both.

Despite the challenges the Saltus Wealth Index - a measure that tracks the confidence high net worth individuals (HNWIs) have in the UK economy and their personal finances - has risen to 64.4, implying a small upward trend in confidence.

According to the study:

• 3 in 4 HNW individuals are providing financial support to younger generations
• Seven in ten (70%) are financially supporting their adult children and eight in ten (80%) are supporting adult grandchildren
• On average, HNWIs are providing £10,000 of support a year to their family members
• Some of the most common expenses they are helping pay for include mortgage payments, higher education fees, household bills and private medical care
• About a third of older people say they are funding this extra support from 'excess' income but most say they have had to rethink their own financial positions to help their families.

Saltus says the finding suggest the ‘bank of mum and dad’ is still providing “vital financial support” to the younger generations as they struggle with the cost of living crisis.

Most respondents in the survey said they were already providing support to their grown up children (54%) and grandchildren (68%) before the cost of living crisis hit, with holidays by far the most common way in which they were providing financial support, followed by educational costs.

On average, this client segment is supporting adult children to the tune of just over £12,000 a year and just under £11,000 for adult grandchildren.

However, while ongoing financial support is fairly common between the generations, the report shows that 25% of HNWIs have started providing support as direct result of the cost of living crisis.

Among this group, the costs they are most likely to be helping their adult children with are mortgage payments (22%), household bills (22%) and groceries (17%). On average these parents have given their adult children just under £11,000 over the past 12 months.

Those that have started providing support to their adult grandchildren as a direct result of the cost of living crisis have given just over £15,000 in the past 12 months, most commonly to pay for energy bills (23%), holidays (23%), mortgage payments (15%), transport costs (15%) and higher education fees (15%).

In the previous Saltus Wealth Index Report – released six months ago – the rising cost of school fees was a common reason why many older HNWIs were providing financial support to younger generations, and this is still the case. In the latest report, 7% say they are helping their adult children pay for school fees, likely to support grandchildren’s private education.

The Saltus Wealth Index Report shows that, overall, confidence is rising, with the Index having strengthened over the last six months. While not yet reaching levels seen prior to the Liz Truss premiership, the Index now stands at 64.4, a rise of nearly 6% on levels recorded in the middle of last year, when it stood at 60.9.

According to the latest report, despite HNW individuals’ slight increase in confidence, the data show that the vast majority of HNWIs have seen their own finances hit by the cost of living crisis as well as those of their families. Just 9% of all respondents say the current financial climate has not impacted them at all.

While most HNWIs have made fairly small changes – for example, reducing their personal spending, cutting down on eating out, buying fewer luxury items, taking fewer holidays or switching to a cheaper supermarket – many have also made much more drastic changes. Some 13% have reduced pension contributions, 13% have borrowed money and 12% have sold a property in order to balance their finances.

According to the data, while a third (32%) of those who are providing support to their adult children have managed to fund extra support through excess income, the rest have had to cut back, with 16% tapping into housing equity and 15% reducing their pension contributions to provide support to their adult children.

Mike Stimpson, partner at Saltus said: “Our latest research shows that although overall confidence in the economy may be beginning to rise again after a period of uncertainty, when it comes to the cost of living crisis, HNWIs are continuing to provide support to their wider family members and that this is now spanning multiple generations.

“In recent times, it has been common that we see parents helping their adult children afford big purchases, such as deposits on houses or buying their first car, but we are now seeing this financial support trickling down to cover the smaller, everyday costs that have risen so steeply.

“What is striking from this research is how many HNWIs are dipping into pension pots and other bigger and longer-term investments in order to be able to provide this support. The high numbers of people reducing pension contributions or tapping into housing equity to help cover their families’ expenses is alarming as it could lead to knock-on impacts on their plans for retirement.”

Financial Planning Today Analysis: Saltus' survey findings are in line with other recent studies suggesting that older generations are helping hard-pressed younger family members struggling with the cost of living challenges. The Saltus study, however, provides more granular detail than some other recent reports and reveals that it is likely some older savers are cutting back on their own pension saving and selling assets to help children and grandchildren. If this continues for a lengthy period it could well harm pension savings, something the government and providers will be keen to avoid. It will be interesting to see if this cross-generation 'subsidy' - which has always existed to some extent - is scaled back as inflation eases or whether it will become a permanent feature of the personal finance landscape. From a Financial Planning point of view it may encourage more planners to look at reaching both younger and older members of the same family to ensure that the impact of generational subsidy is mitigated and good practice is applied to ensure one generation does not suffer long term from this trend.