For many Australian families, the ‘Bank of Mum and Dad’ has become a very real part of financial life. It might involve helping with a home deposit, going guarantor, covering study costs, or giving your adult children breathing room while they save. Done thoughtfully, that support can be incredibly powerful – not just as a transfer of money, but also as a transfer of opportunity.
Of course, it’s worth acknowledging that not every family has this option,[1] so it makes sense for families who can (and choose to) provide the extra help to do so carefully, fairly and with full awareness of the privilege involved.
If you’re considering a financial arrangement to give your kids a boost (beyond the daily offerings of meals, emotional support and full access rights to your fridge and pantry), the key is to be clear from the start about whether that support is a gift, a loan, or something else entirely.
If it’s a gift, everyone should understand that it’s not expected to be repaid.
If it’s a loan, then the amount, repayment expectations and timing need to be clearly documented upfront.
Whatever arrangement, a good step is to put it in writing, so all parties are clear beforehand about exactly what’s being agreed to. Without that clarity, good intentions can become complicated, particularly if circumstances change – like if a relationship breaks down, parents need the money later, siblings feel unfairly treated, or estate plans no longer reflect what everyone assumed.
If it’s done well, the ‘Bank of Mum and Dad’ can be a means to supporting the next generation while still protecting family harmony, retirement security and the generosity behind the gesture.
– Just be aware of potential pitfalls and, if you’re unsure, or need advice on how to best approach an arrangement, seek professional advice.
For independent financial advice, book an appointment with me at Align Financial. Call (02) 9913 9995.
[1] Australian research examining the ‘Bank of Mum and Dad’ shows how parental financial assistance can help some people enter home ownership and accumulate assets earlier than they otherwise could. This suggests that access to family wealth can create intergenerational advantages, allowing some to get ahead financially with the support of family resources, while others begin from a very different starting point.
(The Bank of Mum & Dad – intergenerational transfers and first-time homeownership in Australia, by Gidem-Bayram, Whelan and Wood, published on 15 November 2024 by Springer Nature Link, https://link.springer.com/article/10.1007/s11150-024-09732-7)
