Parents who have lent to their children are out of pocket by an average of £12,700 - Prudential

The research also shows that in many cases the Bank of Mum and Dad doesn’t expect its loans to be repaid in full, with more than two in five (44 per cent) parents who have lent money to their families admitting it is unlikely that they will ever see the full amount of money again.

However, the potential for significant financial loss from written-off loans doesn’t appear to deter them. More than two thirds (68 per cent) of the more than 1,000 parents interviewed have already loaned money to their families, or have definite plans to do so in the future, while the remaining (32 per cent) all hope to be in a position to act as their children’s preferred lender some time in the future.

Of those parents who are considering lending to their offspring in the future, many are also unsure they will get the money back – nearly two fifths (37 per cent) think it is unlikely they will be repaid, while only just over a quarter (28 per cent) expect to be repaid eventually if they are called on as a lender.

Stan Russell, a retirement income expert at Prudential, said: “As a parent myself I completely understand that most of us who are in a position to do so would want to provide financial help to our children. But as our research shows, in many cases this financial support ends up being gifts from Mum and Dad rather than the loans from the Bank of Mum and Dad they start out as.

“These written-off loans risk making a long-term dent in the finances of parents, often at the stage in their lives when they would like their money to be invested for the future and working hard for them in a pension. If the choice is between providing loans to their children or continuing to contribute to a pension, many parents could benefit from a consultation with a professional financial adviser before making that decision.”

Backing up a report published by the Social Mobility Commission in March 2017, which revealed that young people are increasingly reliant on the Bank of Mum and Dad to help fund the purchase of their first house, Prudential’s research shows that two in five loans from parents (39 per cent) went towards a deposit for a house or buying a home outright.

The second most popular reason (28 per cent) for lending money was to help buy a car. But the study shows cash is also going on paying off student and credit card debts as well as for general living expenses.