The cost of the Bank of Mum and Dad phenomenon to parents has been laid bare by new research carried out by financial services firm Prudential.

Those who have lent money to their children or grandchildren are owed, on average, £12,700, while 11% of Bank of Mum and Dad loans are for figures worth more than £20,000.

In many cases, though, parents don’t expect their offspring to repay the loans in full, with the findings revealing that 44% of those who have lent financial assistance to their children believe that they are unlikely to ever see the full amount again.

This potential financial loss from written-off loans doesn’t discourage the majority of parents from lending to their children, though. Some 68% of the over 1,000 parents polled in the research have already loaned money to their children, or have firm plans to do so at some point in the future. Meanwhile, the remaining 32% hope to be in a strong enough financial situation at some point to act as their children’s ‘preferred lender’.

For those parents who are considering lending money to their children in the future, many remain uncertain that they will ever see that money again. Some 37% think it is unlikely they will be repaid, while 28% said they expected to be repaid eventually if they acted as a lender for their offspring.

“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,” Stan Russell, a retirement income expert at Prudential, commented.

“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.”

He added: “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.”

The research backs up the report released earlier this year by the Social Mobility Commission, which found that young people are more reliant than ever on the Bank of Mum and Dad to help bankroll the acquisition of their first home. Prudential’s survey found that two in five loans from parents go towards a deposit for a house or buying a property outright.

After property, the second biggest outgoing for the Bank of Mum and Dad was to aid their offspring’s purchase of a car. In addition, cash is going towards writing off student and credit card debts and helping out with general day-to-day living costs, which are currently being upped by rising inflation and squeezed or stalling wages.

“As many younger people struggle to get onto the housing ladder it has become widely accepted practice for parents to help out where they can, but children going to the Bank of Mum and Dad to help cover everyday living expenses is a worry,” Russell continued. “For many parents, repeated pay outs to their children could have a detrimental impact on their own long-term saving for retirement.”