Banking on mum and dad: a key pillar in multigenerational wealth transfer

Introduction

Warren Buffett famously stated that he plans to give away 99% of his wealth, leaving his children with enough to do anything, but not too much to do nothing. Many parents grapple with the question of how much to give and when to give it, ensuring that wealth enhances rather than hinders personal and professional development of the next generation.

One of the most prominent mechanisms of intergenerational wealth transfer is what has come to be known as the "Bank of Mum and Dad" (BOMAD). The term, coined around 2014, reflects the growing reliance of younger generations on parental financial support, particularly in securing a footing on the property ladder and achieving financial security, a cultural phenomenon that has emerged only in the last century or so. The concept has since evolved beyond homeownership, extending into broader financial assistance such as education, business funding and general lifestyle support – as the younger generations, certainly millennials and increasingly Generation Z (“Gen Z”), lean on parents and guardians for support in these areas. 

The growing influence of the BOMAD

According to data from Legal & General, an increasing proportion of mortgages in the UK rely on parental contributions. In 2017 alone, the BOMAD funded a reported £2.3 billion in mortgage repayments on nearly 460,000 properties. In 2023, Millennials (those born between 1981 and 1996) finally reached a significant milestone, with a higher proportion of millennials now owning a home, rather than renting.¹

In her book 'Inheritocracy', Eliza Filby outlined that the trend of BOMAD providing financial support is largely repeated in other countries, with 43% of homebuyers under 35 receiving assistance in the US and over 40% of millennials in Australia and China also benefiting from parental support when purchasing homes. With the rise in cost of living that we have seen over the last few years, this trend is unlikely to slow down in the near term. 

The importance of strategic wealth transfer

The October 2024 UK Budget introduced significant changes to inheritance tax (IHT) rules that will dramatically reshape the landscape of wealth transfer in the future. From April 2027, pensions—which are currently outside the estate for IHT purposes—will become subject to taxation. Similarly, assets qualifying for Business Property Relief (BPR) and Agricultural Property Relief (APR) will face a 50% IHT rate from April 2026, with an allowance of £1 million per estate.

These changes underscore the need for proactive financial planning. Families must consider the timing and structuring of gifts, balancing tax efficiency with financial security. 

Conclusion

Over the next thirty years, a record £7 trillion in wealth is due to be transferred to the next generation in the UK alone, which underscores the importance of getting succession planning right.²

The Bank of Mum and Dad is more than a convenient source of financial support; it is a cornerstone of multigenerational wealth transfer that is reshaping economic realities in the UK and globally. With rising inheritance tax implications, families must adopt a structured approach to gifting and succession planning. Whether through property purchases, education funding or broader financial support, the BOMAD will remain an essential factor in shaping the financial well-being of Millennials and Generation Z. As the largest wealth transfer in history unfolds, strategic planning, financial education and responsible wealth management will be crucial in ensuring that inherited assets enhance the quality of life without eroding ambition and personal growth.

[1] Source: 'Inheritocracy', book by Eliza Filby

[2] Source: Vanguard Analysis based on ONS 2020 Wealth and Assets Survey, and 2020 National and Subnational Mid-year Population Estimates for the UK, Demos: A new age of inheritance (January 2023)