However, take a look at modern financial relationships between family members, and very quickly a remarkably different picture emerges. Despite just 900,000 of the 22 million households in the UK including three generations⁶, research by engage shows that the financial ties between generations go far beyond bricks and mortar. For example, almost half (49%)* of parents with children over the age of 25 are helping them to cover the basic costs of living. There is a clear willingness across generations to provide financial support to family members to help deal with the increasing financial pressures of modern living. What is concerning is the lack of planning and preparation that families are putting into providing that support.

3GB or Three Generation Britain aims to uncover these financial interdependencies between generations whilst providing families with solutions to overcoming the increasing financial reliance between generations. engage will explore how finances influence family relationships, drawing people's attention to the need for long term financial planning which encompasses family needs and expectations.

Below is an outline of the different aspects of 3GB. By looking at the financial situation each generation in isolation, it becomes all too clear that each generation's finances are tied inextricably to the financial situation of their family members.

Family Purse Strings Tying Generations Together

Parents Supporting Off Spring: With the cost of raising a child to the age of 21 being placed at £166,000⁷, student debt averaging £15,000 and rising⁸, and first time buyers being priced out of the property market, flying the nest and gaining financial independence from parents is becoming an increasing struggle for young Britons.

Recent reports have suggested that 50p of every £1 that the average graduate earns will be swallowed by tax, student debt repayments and soon-to-be-compulsory contributions to the new national pension saving scheme (NPSS)⁹, leaving the young to increasingly turn to their parents for financial relief. Today the average parent pays £18,000 towards the cost of their child's first home¹⁰, more than one in five (22%) parents providing money to help pay off their child's debts in the last six months and one in six (14%)* being prepared to switch jobs in order to ensure that they can provide for their child's university education.

The picture starting to emerge from research by engage is that far from dying, the relationship between parents and off spring is as strong as ever, lasting well into adulthood. In fact, this month the Future Foundation reported that "far from being self serving workaholics with no time for their children, modern parents spend four times as much time with their children as the mothers and fathers of 30 years ago"¹¹.

Off Spring Supporting their Elderly Parents: By the year 2020 there will be more pensioners than tax payers, with recent reports suggesting that nine out of 10 pensioners are at risk of using up all their retirement savings before they die¹², leaving OAPs reliant on either the state or their family for care in their old age.

Although research by engage has shown that 9 in ten adults* do not feel able to support their parents financially in old age, one in five will invite their parents to live with them (14%) or other family members (5%) in old age in order to provide them with care*.

Grandparents Supporting the Younger Generations: With emptying pensions pots and the threshold for inheritance tax rising by 85% since 1996¹³, elderly generations are finding it increasingly difficult to help support younger generations. In December the BBC reported on a growing acceptance of debt amongst OAPs¹⁴, suggesting that this situation is worsening.

However, engage reports willingness amongst grandparents to contribute toward the future of their grandchildren, being more likely than parents to make one off payments into their grandchildren's CTFs. More than one in five (21%) retired grandparents have also contributed towards the costs of childcare for their grandchildren in the last 6 months*.

Piggy Bank in The Middle

The middle generation is being increasingly stretched by their financial ties to older and younger generations - while parents make cut backs to support their children into adulthood, they are also feeling a growing pressure from their parents to provide for them in old age.

Many families will face major problems in meeting their aspiration to provide financial support for each other if they don't start to prepare well in advance. There is a pressing need for financial providers to respond to this pressure on the modern family and become focused on the need for "family finance", not "personal finance". This is familiar territory for mutual providers, with a long tradition of strong family and community ties. It is more important now than ever before that we all work to encourage families to take those all important first steps to develop at least a basic savings habit to help provide for the future. Simple products such as savings accounts, child trust funds and basic long term savings plans can all play a helpful role in developing a savings habit.

engage Mutual Assurance has developed 3GB as a campaign which will seek to understand and meet the needs of the modern family, informing the way we address our customers. Looking at the picture emerging, engage is building a bank of resources and knowledge which will help us to develop a product range to help overcome the problems exposed. We aim to work within the field of family finance, not personal finance to help our customers tackle the issues raised by 3GB.

¹ Office of National Statistics
² NFPI
³ The Times
⁴ BBC Online
⁵ The Guardian, 4th October
⁶ Age Concern, December 2005
⁷ BBC Online, 25th November 2005
⁸ The Telegraph Money, 23rd September 2006
⁹ The Daily Telegraph, 23rd September 2006
¹⁰ Daily Telegraph, 3rd August 2006
¹¹ The Times, October 2006
¹² BBC Online, 4th October 2006
¹³ BBC Online, September 2006
¹⁴ BBC Online, 14th September 2006