Do you feel as though you’re constantly forking out to help your adult children? If so, then you’re not alone. According to a survey of 2000 people by Finder.com.au, an estimated 74 per cent of parents are helping their adult children financially.
Paying university fees, allowing them to live rent free and helping them with home deposits are all ways that parents continue to fund their adult children’s lifestyle. While the majority are happy to sit back and receive what’s coming their way, 28 per cent of financial assistance recipients are embarrassed about not being able to stand on their own two feet.
Finder.com.au spokesperson Bessie Hassan said there were several reasons why adult children found themselves in need of a helping hand. These include student loans, high property prices and undertaking unpaid internships to enable them to secure work in their chosen field. While she acknowledged that some parents simply want to help their children, handouts aren’t always the best way to do so. “If you insist on giving money to your child, consider making it a loan, with strict conditions on when and how it is to be paid back,” Ms Hassan said.
However, social researcher Mark McCrindle said adult children shouldn’t be embarrassed, rather consider the money as receiving their inheritance early. Noting there had been a social change in recent decades where parents no longer save to leave their children an inheritance, he said, “Now it’s reversed and the giving of money takes place when the children are younger and need it,” he said.
“The cost of living has never been greater, generations have never started working later in life, and they are starting in debt.
“It’s never been harder to get established, and parents are realising that it was easier in their day.”
With Mr McCrindle also stating that baby boomers represent 25 per cent of the population but hold 50 per cent of the nation’s wealth, he believes that they were born the lucky generation. “The baby boomers were born at a lucky time and have had 50 years of an economic miracle, free degrees and tripling house prices,” he said.
“It’s not the young ones sponging – it’s intergenerational wealth recycling.”
Parents want to give their children a head start. That’s only natural. But should they be expected, whether they can afford it or not, to fund their lifestyles once they’re old enough to stand on their own two feet? I think not.
I tend to agree with Ms Hassan, if an adult child needs a bit of financial assistance, give it as a low-interest loan. Handouts, or clearing your child’s debt may give you the feel-good factor, but in the long run you’re only setting them up for a fall. Learning to stand on your own two feet financially and budget is as important as anything you’re taught at university.
And it’s too simplistic of Mark McCrindle to say that baby boomers had it lucky. The generation that is now our current retirees and pre retirees may have, according to Mr McCrindle, on average $1.2 million in wealth, but that $1.2 million is often tied up in the property that they worked all their lives to pay off. That $1.2 million has been diligently saved using the lessons they learned from their parents – work hard and save hard. If baby boomers wanted to buy a car in their late teens they saved hard and more often than not it was bought third or fourth hand, it certainly wasn’t a brand new luxury model.
When the time came to buy a home, they often worked two or even three jobs to save the deposit and in order to pay the mortgage, nights out were few and far between and overseas holidays were only for the dreamers. Today’s baby boomers may well be wealthy on paper, but with limited years of superannuation savings, that ‘wealth’ has to fund many years in retirement, and more than likely, expensive aged care
The reality for a growing number of baby boomers is that they retire with a debt to repay. According to an ING report last year, of its customers aged between 65 and 80, the average mortgage debt was $158,500. And with a seven per cent increase in debt held by those aged 35 to 55, it’s increasingly likely that their mortgage will not be paid off before they retire.
Whether or not a parent chooses to fund their adult child’s lifestyle by paying their tertiary debts, helping them with a house deposit, or simply giving them cash handouts is entirely up to them. But those lucky adult children should definitely see it as an incredibly generous act by loving parents and not a case of getting what is due to them anyway.
Do you agree? Do you think adult children expect too much from their parents? Should they be made to stand on their own two feet? Or, if parents can afford it, should they give children their ‘inheritance’ when they need it?