As Australia’s cost of living crisis intensifies, many families have turned to the Bank of Mum & Dad to help ease the financial burden of raising children and staying financially afloat.
New data reveals that nearly three-quarters of Australian grandparents are stepping up to support their adult children financially, often providing much-needed relief in these challenging times.
The Extent of Support
According to recent research, 31% of grandparents are gifting money or offering free childcare to their families.
This support isn’t trivial—considering that childcare can cost approximately $150 per day, the financial burden lifted from young families amounts to over $7,000 annually.
David Koch, Economic Director at Compare the Market and a well-known Australian TV personality, highlights the significant impact of this assistance. “Childcare costs are more expensive than having a kid in Year 12 at a private school,” Koch notes.
Beyond childcare, grandparents are also helping their children enter the property market and contributing to household bills. This level of support underscores the critical role that older generations play in stabilising the financial well-being of their families.
Navigating Financial Support
However, borrowing money from family can be a delicate issue. “It’s a bit of a minefield,” Koch admits. To navigate this carefully and ensure that family dynamics remain harmonious, he offers several pieces of advice.
“Keep it professional, write it down. If you are going to lend money to families, make sure the terms are all written down. This is a loan; it’s got to be paid back. If you want to make it interest-free, make it interest-free,” he advises.
Setting clear boundaries and repayment terms is crucial. “The timeline that the money’s got to be paid back is important so that other kids in the family don’t say, well, you’re favoring this sibling and not ours, and they’re taking advantage of the whole family,” Koch explains.
By approaching family loans with the same rigor as a bank, families can prevent disputes and ensure that everyone knows where they stand.
The Risk of Over-Reliance
While the generosity of grandparents is commendable, there’s a concern about adult children becoming too reliant on their parents for financial support.
Koch is candid about this issue. “I think kids are big enough and ugly enough to actually stand on their own two feet; they’ve got to have that responsibility,” he states
He emphasises the importance of financial independence and making sacrifices to achieve significant financial goals, such as buying a house.
Koch often shares his own experiences with his children, urging them to adopt a “pandemic budget” mindset.
“During the pandemic, during lockdown, savings rates in Australia went to record levels. Why? Because we didn’t spend it on restaurants and going out and all that sort of thing. So you’ve got to make those sacrifices, and you’ll be amazed how quickly they can save up for things or make ends meet.”
Take it from someone who’s waiting for the Bank of Grandparents to open (and all that that implies.)
We don’t want this. I don’t want my grandparent’s money. I don’t want to wait until my grandparents are gone to buy a house.
Don’t talk to us about making sacrifices for financial goals. I earn a wage very close to the Australian Median, and have just been advised that I do not earn enough to successfully pay off a mortgage until the Bank of Grandparents comes due and I can cough up one-third of the cost of a small apartment. Upfront.
This isn’t about sacrifices. This is about the goalpost being moved far beyond what any reasonable person can afford.