One in four face hardship for their children’s future

Have you helped your child get on the ladder? How much did you sacrifice?

Boomers sacrificing for their kids

The lengths some parents will go to give their kids a leg up is, simply put, admirable. Especially when one in four parents face hardship to get their children on the ladder.

The Bank of Mum and Dad’s contribution has risen 41 per cent in the last two years, making it the fifth biggest lender in Australia.

The 1.2 million parents who make up BOMAD lent a total of $92 billion in property assistance in 2019 to children to help them onto the property ladder. Almost six in 10 (59 per cent) did so not expecting repayment. Of the parents expecting repayment, nearly 20 per cent said their child is yet to make one.

Almost half of these parents cut their expenses or delayed retirement to help their children.

Around one third of parents helped their children buy a home between 2017 and 2019. On average, they lent $73,522 to their children, up $9316 from 2017.

Since 2017, the total sum lent by BOMAD has increased from $65.3 billion to $92.3 billion in 2019.

New research reveals that 64 per cent of parents diverted their own savings to help their kids, while 16 per cent pulled money from their home equity and 13 per cent delayed retirement.

“The property market in Australia is incredibly challenging for younger generations to break into with property prices surging by 395 per cent in the last 25 years. For this reason the Bank of Mum and Dad has become an essential player in our nation’s housing market. Loan contributions have grown by 41 per cent in the last two years alone highlighting that the Bank of Mum and Dad will not be closing shop anytime soon,” says Mozo director Kirsty Lamont.

“It could be argued that such a dominance in family assistance is feeding into a greater inequality in this country with many first home buyer hopefuls without financial aid remaining locked out as property prices rise faster than they can feasibly save a deposit.

“Income to property ratios have changed dramatically in the past 25 years. At present, the cost of buying a property is 7.2 times the annual income of a typical household, whereas 25 years ago it was 1.6 times the annual household income.”

The survey revealed that:

  • 43 per cent of parents let their children live at home to help them save for a deposit
  • 32 per cent provide money for a home loan deposit
  • 14 per cent act as a guarantor
  • 10 per cent assist with repayments
  • 9 per cent buy a property on their children’s behalf
  • 6 per cent buy property as a partner.

And BOMAD goes beyond lending children money for a home, with 46 per cent of parents contributing towards a vehicle, 39 per cent helping with education costs, 33 per cent helping out with the bills and 27 per cent paying for household items such as couches and beds.

Nearly half of the respondents said they sacrificed their own savings or delayed their retirement in order to help their children, with one in four reporting financial hardship as a result.

“Many parents are feeling the pressure to help their children purchase their first property and for some, this is causing a real strain, especially when they find themselves working for far longer than they’d envisioned, or repayment deals are reneged on. With one in four parents providing assistance at risk of financial hardship, the path to property ownership is less than rosy for many families,” says Ms Lamont.

“For younger generations hoping to own their own home, it can certainly feel like a deal breaker whether or not Mum and Dad are available to chip in. While the property market can feel like a large fence to scale, there are ways for first home buyers to save for a deposit independently.

“From making a concentrated effort to blast debt to looking at first homeowner grants in your state and considering ‘rentvestment’, there are ways to make your first home purchase a possibility.”

Did you help your children buy their first home? If not, how do/did you help them? Do you view it as the role of a parent to help out where possible? Does this necessarily have to included financial assistance?

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    COMMENTS

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    OL
    9th Mar 2020
    10:23am
    While having recently retired, I help my 38 year old son move forward towards owning his own home by helping him in his business financially. He wants to show that he can make his own personal way forward by making his business the provider.
    Karen
    9th Mar 2020
    10:47am
    Those who chose hardship in retirement in order to give their descendants a better chance than they usually had, are the one who, throughout life, had fewer choices already.

    Deservin' ain't got nothin' to do with it...
    Horace Cope
    9th Mar 2020
    11:01am
    "Did you help your children buy their first home? If not, how do/did you help them? Do you view it as the role of a parent to help out where possible? Does this necessarily have to included financial assistance?"

    No, we didn't help our children buy their first home. We did help them with labour to do work around the homes they purchased as they were older homes in need of work and therefore a bit cheaper. Yes, as a parent we view our role as helping out where possible. In our case, financial assistance is not possible. Our past financial assistance involved support with tertiary studies allowing our children to be further educated whilst living at home rent free. Their qualifications have kept them employed and we have shown them how to budget, save and spend wisely which has helped with deposits and legals when the home purchase was made.
    floss
    9th Mar 2020
    1:24pm
    It was once easy for us to purchase our first home a long while before our crazy population boom was deemed necessary by our Federal Government.What a con that is.
    Karen
    9th Mar 2020
    1:34pm
    Corona will sort out over-population - so they keep telling us - that or the toilet paper shortage.....
    Incognito
    9th Mar 2020
    2:16pm
    The job of parents is to help their children be self sufficient, self reliant and to stand on their own two feet. Give them time and love, not money.
    Eddy
    9th Mar 2020
    4:31pm
    Musicveg, we did give them time and love but we also gave them money, or at least helped them get ahead on the property market by using our assets (ie our house) to get a loan. For instance we also paid their HECS. To us it makes perfect sense to be able to help them now while we are around to see it rather than have them wait for us to die. Nevertheless we did not sacrifice our own well-being or financial position, we never 'lent' them more than we could afford to do without.
    Incognito
    9th Mar 2020
    5:02pm
    Must admit I was generalizing, sorry. Great that you could afford to and yes I agree help them now rather than wait for them to get inheritance that way you get to see the results. I just think some kids get too much and depend on their parents to bail them out all the time. So I guess it is about offering and not being asked to help, if some kids keep asking then they are not at least trying to be self reliant.
    Eddy
    9th Mar 2020
    8:41pm
    I apologise if I jumped too harshly at your comment Musicveg. We are very fortunate that we can help them, I know many cannot even if they wanted too.
    Incognito
    9th Mar 2020
    8:59pm
    No worries Eddy, no offence taken. I think those who can help are very lucky, my mum never worked out of the home and my dad never had super, so I never asked for anything, saved up for my first car etc. but still I do not own a home, my only regret, I chose to travel when young and never set myself up.
    older&wiser
    9th Mar 2020
    6:45pm
    Don't agree with giving them money I have worked hard for as a single parent. I have always been single worked hard, and have instilled that ethos to my daughter.
    Nor do I belive in scrimping my lifestyle now that I am retired, so as to leave anything to my daughter. And though I worked hard, mostly in low paying jobs, I managed to buy a small house, but had to use some of my super after being shafted from my job at age 64, and not being able to find any other job. So I live on the aged pension, and if I could plan it, would spend my last dollar the day before I cark it.
    I strongly oppose hearing seniors living in penury so as to leave something for the kids. They are not entitled to anything.
    ex PS
    9th Mar 2020
    11:58pm
    The best help we can give our offspring is to teach them selfreliance, self confidencevand the simple truth that if youbwant someting worthwhile you wil have to work for it. Just giving them money only teaches them to rely in someone else.
    David
    10th Mar 2020
    1:21pm
    100% agree.
    My daughter was saving up for a home and only had a 10% deposit. She wanted me to go guarantor. I said no way.
    So she saved harder, worked extra hours and spent less (like I did when saving for my first home) and ended up with a 30% deposit. She is living proof that young people can buy a home if they are disciplined and make sacrifices.
    Scrobo1
    10th Mar 2020
    5:50am
    Buy a house, no. Almost everything else, yes I have done for my kids. Cars, medical, education, paying bills. My wife and I live on a government pension, and even if we thought we would be repaid, it won’t happen. Still paying off one of their debts. Would I do it again, hell NO. (Medical, always), and for grandkids.
    Cheezil61
    10th Mar 2020
    8:00am
    Wish I had 'spare' money to help my kids (36 & 25) with housing etc, I would if I had it to begin with! They do not expect it or rarely ask for it but the couple times they did they were told sorry no I just don't have any money in the bank/no savings. I live pay to pay but I'm not in any debt & would not go in to debt to help the kids- they have to learn to forge their own way in life, just like I've had to (set backs & all - have had to pay out 2 exes to keep a roof over my kids heads when they were young & that has been tough but I am tougher!). Youngest son lives wit me & works long hours but cannot save for a house of his own or even afford to rent (he travels 100km to work each day-& 100kms home again so much of his wage goes on fuel & car running costs but he never asks for help. Lives with me & only time i ask for mobey from him is if my regular bills are more than they would be if i lived alone (ie it costs me nothing to have him living here). Never see each other but nice knowing he's doing ok.
    David
    10th Mar 2020
    1:35pm
    My daughter was saving up for a home and only had a 10% deposit. She wanted me to go guarantor. I said no way.
    So she saved harder, worked extra hours and spent less (like I did when saving for my first home) and ended up with a 30% deposit. She is living proof that young people can buy a home without help from their parents if they are disciplined and make sacrifices.
    *Loloften*
    27th May 2020
    10:16pm
    This article is nothing new.....been happening for very many decades, way back when we seniors were told by our parents "there's nothing more finanancially important than purchasing your own home." Many of us wed in our early/mid 20s & t'was expected that bride's parents paid for the wedding & my in-laws (as many did) matched that cost with a cash wedding present. Home mortgage interest rates were 17-18% way back then, we both worked hard (luckily jobs were prevalent), no o'seas holidays - just camping, no going out for long lunches/dinners, entertained in our then dilapidated "newly purchased" homes to ensure we could pay our mortgages. By the time our children (we only had 2) were old enough to leave home, we were "comfortable enough" to ensure they could also purchase their own homes in their mid-20s. It's never been easy even tho' mortgage rates were much lower (approx 8%) by then & housing costs continued to dble approx every 8-10yrs our kids still had to "go w/out" for more than a few yrs, especially when gifted us with many adored grandkids - however, most gratefully, they're wealthier than us now & we finally haven't "gone w/out" for past approx 20yrs & may eventually need to access "home equity" if live long enough. Knowing that - our kids neither expect nor want a lge inheritance. Home costs are still now only doubling approx every 8-10yrs but this generation appears to not want to buy homes in what was "the back blocks" back then/full-time, secure jobs are not as prevalent as were in our days & annual pay increases almost defunct. Help your kids so they can help your grandkids.