Retirement
Parents must be cautious when lending to their kids
Young Australians are increasingly turning to their parents to help them enter the property market, but the so-called ‘Bank of Mum and Dad’ needs to be cautious when lending to children.
Parents must be cautious when lending to their kids
Young Australians are increasingly turning to their parents to help them enter the property market, but the so-called ‘Bank of Mum and Dad’ needs to be cautious when lending to children.
Data from research company Digital Finance Analytics suggests the average amount lent by parents to their kids to help them buy property is more than $88,000 and that cumulatively, the amount lent by parents to their children in Australia is estimated to be at least $16 billion
Melissa Browne, a financial adviser and CEO of wealth and accounting firm A&TA, said parents need to “proceed with caution” if they choose to lend to their children, and suggested those who do wish to help their kids enter the increasingly expensive property market should think carefully about how they do so.
One way parents can help, Ms Browne said, is lending or gifting them the deposit they’ll need to purchase the property, and that some parents “may even opt to co-own” the property with their children.
Parents could also consider unlocking some of the equity in their own home or property to help finance this, but urged those parents to ensure their children understood the risk this would present before doing so.
“It is unhelpful to everyone concerned if you assist your children with a deposit and they subsequently find the mortgage repayments burdensome, so it’s important not to over-extend on borrowing and to make sure from the outset that the loan can be repaid at an interest rate of 8 per cent,” Ms Browne said.
“Then you will be in the strongest possible position to help your kids later, when they may really need your financial assistance”.
RELATED ARTICLES
Retirement Planning
Empowering your future: Financial literacy and retirement planning in Australia
In today’s complex financial landscape, achieving a secure and comfortable retirement requires more than just saving money. It demands a deep understanding of financial concepts and the ability to ...Read more
Retirement Planning
How much do you need to retire comfortably in Australia?
Retiring comfortably in Australia is a goal shared by many, but achieving this requires careful financial planning and a clear understanding of the cost of living. Read more
Retirement Planning
Retirement planning advice for Australians: Avoiding common pitfalls
Retirement planning is a critical step in securing your financial future, but it's fraught with potential pitfalls that can derail even the best-laid plans. Read more
Retirement Planning
Mastering financial planning for retirement in Australia
Financial planning for retirement is a nuanced journey that requires careful consideration and strategic planning, particularly in Australia's unique financial landscape. Read more
Retirement Planning
Crafting your retirement planning spreadsheet in Australia
Retirement planning is a crucial aspect of financial management, especially in Australia where the landscape of superannuation and investments offers unique opportunities and challenges. Read more
Retirement Planning
Maximising your pension plan in Australia: Strategies for a comfortable retirement
In the ever-evolving landscape of retirement planning in Australia, securing a comfortable retirement through your pension plan has become increasingly important. Read more
Retirement Planning
Supporting our veterans: A guide to financial resources and benefits
Military veterans have made invaluable contributions to their country, and in recognition of their service, there are numerous financial resources and benefits available to support them in civilian ...Read more
Retirement Planning
The ultimate retirement planning checklist for Australians
Retirement planning is a multifaceted process that demands careful attention to financial, legal, and personal considerations. Read more
Retirement Planning
Empowering your future: Financial literacy and retirement planning in Australia
In today’s complex financial landscape, achieving a secure and comfortable retirement requires more than just saving money. It demands a deep understanding of financial concepts and the ability to ...Read more
Retirement Planning
How much do you need to retire comfortably in Australia?
Retiring comfortably in Australia is a goal shared by many, but achieving this requires careful financial planning and a clear understanding of the cost of living. Read more
Retirement Planning
Retirement planning advice for Australians: Avoiding common pitfalls
Retirement planning is a critical step in securing your financial future, but it's fraught with potential pitfalls that can derail even the best-laid plans. Read more
Retirement Planning
Mastering financial planning for retirement in Australia
Financial planning for retirement is a nuanced journey that requires careful consideration and strategic planning, particularly in Australia's unique financial landscape. Read more
Retirement Planning
Crafting your retirement planning spreadsheet in Australia
Retirement planning is a crucial aspect of financial management, especially in Australia where the landscape of superannuation and investments offers unique opportunities and challenges. Read more
Retirement Planning
Maximising your pension plan in Australia: Strategies for a comfortable retirement
In the ever-evolving landscape of retirement planning in Australia, securing a comfortable retirement through your pension plan has become increasingly important. Read more
Retirement Planning
Supporting our veterans: A guide to financial resources and benefits
Military veterans have made invaluable contributions to their country, and in recognition of their service, there are numerous financial resources and benefits available to support them in civilian ...Read more
Retirement Planning
The ultimate retirement planning checklist for Australians
Retirement planning is a multifaceted process that demands careful attention to financial, legal, and personal considerations. Read more
