The “bank of mum and dad” is helping adult children with not only housing costs but everything from fuel and phone bills to holidays, a new survey shows.
More than half of Australian parents surveyed subsidise the lifestyles of their adult children, with almost 40 per cent letting them live rent-free and about the same proportion paying for their groceries.
About one in three parents help pay for mobile phones, internet or other bills, according to a survey by comparison platform Finder, while one in five pay for some or all of their children’s holidays.
Another 15 per cent lent or gifted money for a home deposit, 15 per cent charged lower rents, 5 per cent went guarantor on a home loan and 4 per cent helped with mortgage payments.
Rising property prices, particularly the return to price growth seen in Sydney and Melbourne after their market slumps, have raised fresh worries about how aspiring home owners can afford to get onto the property ladder.
“As a parent myself, it does concern me that we are seeing a future generation that relies on their parents for everything,” said Kate Browne, a personal finance expert at Finder.
“We know that a lot of younger people do rely on the family to help bolster them when trying to scrape enough money together for a home deposit … but we were surprised [by how many are helping with] day-to-day costs.”
The survey of 1020 adults included 419 parents who all had children over 18, and found about 16 per cent paid for or subsidised tertiary studies. Some 22 per cent paid for car-related costs such as registration and petrol, while similar numbers (21 per cent) paid for transport and part or all of their child’s car.
While this may suggest they had very young adult children, Ms Browne said, a quarter surveyed were also providing free childcare for grandchildren.
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“We’re looking at a generation of ageing Australians providing an awful lot of childcare, and ageing parents potentially putting themselves at financial risk to support their adult children,” Ms Browne said.
|Source: Finder. Note: Survey was conducted in December 2019.|
|How do you financially help your adult children?|
|Pay for groceries||39%|
|Paying for bills (broadband, mobile phone, energy)||35%|
|Provide free childcare||25%|
|Paying for car-related costs (rego, petrol, car insurance)||22%|
|Paid for part or all of car||21%|
|Paying for transport||21%|
|Paying for some or all of holidays||20%|
|Paying for/subsidising tertiary education||16%|
|Charging low rent||15%|
|Loan/money for a home deposit||15%|
|Helped with wedding costs||13%|
|Going/went guarantor for their home loan||5%|
|Help them pay their mortgage||4%|
Rising property prices meant relying on the bank of mum and dad for help with a home deposit had become “a fact of life” for many, Ms Browne said. However she noted such help made it even harder for other first-home buyers, who couldn’t get funds from their parents, to get onto the property ladder.
While some would be able to get assistance under the recently launched federal government First Home Loan Deposit Scheme, only 10,000 of the 100,000 or so first-home buyers who enter the market each financial year will be able to get assistance. All 3000 spaces released so far have already been reserved.
The great disparity between wage growth and property prices growth in recent years had made it more common for younger generations to rely on the bank of mum and dad, said social researcher Ashley Fell from McCrindle Research.
“They’re living at home for longer to alleviate some of the costs that they face,” she said. “The stigma of living at home into your late 20s has been removed, everyone knows the housing market is tough.”
Younger generations are also more likely to study at university, enter the workforce later and are delaying traditional life markers such as having children and getting married, Ms Fell says. Even some Millennials who had children were moving back to the parental nest, she noted.
“They’re starting earning years later in life and stating with a greater debt,” she said. “We also know they have a great desire to travel, so they’ve got competing priorities in terms of savings.”
While giving financial help for other expenses had become more acceptable, even expected by some, Ms Browne urged parents to choose wisely.
“Helping your kids in any way you can is how many see the job of a parent, but mum and dad need to make sure they aren’t hurting themselves in the process,” she said.
Ms Fell said: “A negative impact of this next generation staying at home longer is parents need to and already are working longer.”
Ms Browne added it was also important for adults to become financially responsible.
“When learning to look after yourself financially, you learn through experience … until you’ve moved out of home, blown all your money and can’t afford your groceries, you don’t really learn the importance of budgeting,” she said.
“[And] if you’re going to keep getting bailed out by mum and dad, it’ s probably not a lesson you’re going to learn.”
Weighing up how to financially support adult children is a situation faced by many parents, according to wealth coach Jackson Millan, chief executive of Aureus Financial, who believes it is important to enforce good money management habits early.
“A bank wouldn’t continue to lend money without a clear strategy … without an end in mind, the bank of mum and dad should be the same,” he said. “If kids are employed but they still need help with bills, rent and their car, you may not be setting a good long-term behaviour pattern if you help them.”
Parents will always look to support children in times of hardship if they can, Mr Millan says, and try help them take the very difficult first step onto the property ladder. But, he said, paying for negotiable expenses and “nice to haves” such as holidays could set a bad precedent and encourage children to live beyond their means.
Mr Millan said it was best to treat the root cause, rather than treating money shortfalls with a Band-Aid solution.
“Financial literacy is not taught as it should be at schools,” he added. “So urging your kids to learn the fundamentals of finance and money is really important.”