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As Australia’s cost-of-living crisis drags on, a large new form of intergenerational wealth transfer has emerged. Parents are increasingly risking their own financial security to help their adult children enter the property market.
Recent research from Compare Club’s biannual Bill Stress Index reveals the trend: one in five parents have already provided substantial financial support to their adult children, with many gifting or lending amounts exceeding $75,000.
An additional 47% of parents are considering similar financial assistance, highlighting the growing pressure on the “Bank of Mum and Dad“.
There is a fundamental shift in how younger Australians are entering the property market. Parental support has moved from being a nice advantage to now being virtually essential for many first-home buyers.
This intergenerational support comes at a cost. The research indicates that 6% of parents have either turned to reverse mortgages (potentially very dangerous) or intend to help their children regardless of consequences, potentially compromising their retirement security.
When parents exhaust their savings or take on debt or risk to help their children, they often sacrifice their own financial stability. The Bank of Mum and Dad is effectively operating as an unregulated lending institution, but without the regulated safety nets.
The Bank of Mum and Dad remains one of the few viable paths to property ownership for many young Australians, but helping the next generation to get on the property ladder has a potentially high cost to their parents’ financial security.
Many parents today are becoming the go-to bank their kids are turning to for help.
Many of our kids have nervously watched on as wage growth slowly trudged forward, while house prices soared skyward.
It has become common for parents to field calls from their adult kids – stressed, frustrated and despondent about their property goals slipping further and further out of reach.
More and more of us are heeding the cries for help and stepping-in (and coughing-up) financial support to give our kids a fighting chance to get on the property ladder.
The everyday suburban “Bank of Mum and Dad” is now one of Australia’s largest lenders.
For many first-home buyers, it’s a generous but essential lifeline needed to get a foothold on the ladder.
In January 2025, the national median dwelling value reached $815,000 – a daunting figure for many first-home buyers.
For context, Core Logic’s recent research shows the “affordable” purchase price for the median-income household is about $513,000, leaving a $302,000 gap that most people can’t bridge without help.
The financial support that parents often provide comes in two main ways:
- By gifting or loaning cash to help with a deposit, which can reduce the loan-to-value ratio; and/or
- By becoming a guarantor, leveraging their own home equity to help their child avoid paying lender’s mortgage insurance.
Offering help can have pitfalls – families are complicated at the best of times, but adding money into the mix, can make it get messy fast.
Then consider what many parents are actually risking to make it a reality for their kids – financial security. So it’s a decision that needs to be carefully considered before any levers are pulled.
The risks to consider
Here’s what you need to think through before offering up help:
Erosion of retirement savings
Parents often ask me how they can best financially support their kids and my answer is always the same: One of the most helpful things you can do for your children is ensure that you yourself are financially secure.
Yet, as many are dipping into their superannuation or savings to provide cash gifts, I am concerned that they haven’t fully considered what it will mean for them in their golden years.
With Aussies living longer, you need to be confident that any amount you are giving isn’t going to leave you short down the track.
Also, be aware that financial gifts might affect your eligibility for the age pension, so it’s worth seeking advice before making a decision.
Guarantor gamble
Acting as a guarantor means you’re essentially putting your home and assets on the line in an open-ended way. If your child defaults on the mortgage, the lender can pursue you (the guarantor), to recover the shortfall. Further, the lender can choose to pursue you FIRST – as you are likely to be an easier target.
If either your child or their partner goes bankrupt, then the Trustee-in-Bankruptcy could force the sale of the kids’ assets (including their home), and your contribution could be lost.
relationship Breakdown
If your child’s relationship breaks down (as a large percentage of relationships do), then the soon-to-be-ex-partner ( I call them ‘outlaws’) can sue your child for a share of their combined wealth.
If you have made an outright gift to your child, which was used in the purchase of their home, then when the breakup occurs, the outlaw might get half (or more) of the value of that home, thus sucking your money right out of your bloodline and gone forever.
One in, all in?
If you have more than one child, it’s important to think about treating them fairly and equally.
Supporting one child financially could create expectations among others or even resentment if handled without transparency or planning.
If the time comes and each child in-turn knocks on your door for financial help, can you support them all? And if the ‘first cab off the rank’ ends up being ‘first-in, best dressed’, imagine what that might do to family relationships.
For loans, consider formal written agreements to set clear expectations.
And if you’re giving an early inheritance, seek legal advice to ensure fairness across the family. This must be done very carefully. A DIY kit-Will absolutely will not get the job done.
Get expert advice, have transparent conversations with all members of your family and think carefully about any unintended consequences it may throw up and deal with them ahead of time.
Helping your kids into the property market is an act of generosity, but it’s also one that requires careful planning.
It’s not just about providing a lump sum or swiftly signing on as a guarantor; it’s about setting everyone up for long-term success – without jeopardising your own.
The Bank of Mum and Dad isn’t likely to be closing up shop anytime soon. But, like all good banks, lending considerations need to be carefully thought through.
Whether it’s exploring ways to help, having honest conversations about boundaries, or seeking advice from financial and legal experts, there are steps you can take to help your kids while ensuring your own financial security stays intact.
After all, the best legacy isn’t just helping your kids buy their first home, it’s showing them how to navigate financial decisions thoughtfully, so they can stand on solid ground for years to come.
When it comes to money and our children, emotions can run high. You need to think very carefully – and take professional advice – to make sure that you are doing the right thing for all of your family.
Being sure your retirement funding is established before helping the next generation is important.
Be cautious, and take advice before you decide.
When it comes to Wills, asset protection & estate planning in Australia, you can trust the oldest law firm in South Australia, Genders & Partners to guide you through the tough decisions you must make for your family’s future care and welfare.
If you have any questions, or would like further information, please email us. Would you like a quick phone call to discuss? Feel free email us or use this link and book a timeslot for a free 15-minute phone consultation on my schedule: https://calendly.com/genders
We can help you to protect yourself and your family. We look forward to being of service.
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Disclaimer
The information contained in this document is intended as general information only and has been prepared without taking into account the needs, objectives or financial information of any particular person.
Prior to making any decision, you should assess whether the information is appropriate to your particular needs, objectives and financial circumstances.
While Genders and Partners has taken reasonable care in the preparation of this information, subsequent changes in circumstances (including legislative change) may occur at any time and may impact on the accuracy of this information.
