Bank of Mum and Dad happy to help out with a home loan, but don’t expect an inheritance
For young Aussies, the downside to parents shelling out a collective $65.3 billion to help their kids get into the property market may be that leaving an inheritance is no longer a priority for the older generation, according to a report from National Seniors Australia.
Half of the respondents in the National Seniors Australia survey planned to spend most of their savings in retirement, while 10% were keen to spend the whole lot. Another 49% wanted to spend “some” of their savings on enjoying life-after-work.
That leaves parents who plan to pass their entire rainy day fund onto the next generation as a clear minority at just 3%. According to the report, this was at least in part because older Australians felt the next generation was “already better off than current retirees and they felt no obligation to help them further.”
Another reason was the feeling that retirees had already done their part in helping their kids financially - not surprising, given that Mozo’s recent research into the Bank of Mum and Dad showed that 29% of parents have chipped in to get their kids into the property market.
Aussie parents were willing to contribute an average of $64,206 per family to help their children buy a home, and 67% of those who lent money didn’t expect it to be repaid.
But, as the National Seniors Australia report pointed out, parents using their savings to help out with a house deposit should be careful they aren’t eating too much into their own retirement budget.
One respondent explained that, ‘‘I helped out with the deposit on the first home for both children so that they could get established in a home of their own. The children received a good education and were able to step into well paying jobs in Australia. My current income does not cover the cost of running a home and so there will be nothing left to leave the children.”
Seniors are becoming more aware of the cost of retirement these days, according to the report, with 86% of older Aussies aware of a 6-year increase in life expectancy over the last 30 years, and 76% making some kind of plans to stretch their funds over the extra time.
Tips to spend retirement flush with funds
1. Save, save, save. The power of compound interest is in letting it build up over time, so snag a high interest savings account and start saving today! It’s never too early to start on your retirement fund.
2. Set up term deposits to help you budget. One strategy to help seniors pace themselves and not blow all their cash right at the beginning of retirement, is to set up a series of term deposits, which will all mature at different times. That way, the funds will be released back to you gradually - and you can’t touch them until they are.
3. Sort out your super. Make sure you’re with a competitive super fund, and not paying too many fees. If you’re using a SMSF, make sure you check out our Mozo Experts Choice winners in the SMSF category.