Australian baby boomers cautious about financially supporting their children, new research finds

New market research suggests that the “bank of mum and dad” may be ceasing its operations, despite its best intentions.

New Australian market research suggests the so-called “bank of mum and dad” could be closing for business … despite its best intentions.

New research from AMP presents a complex landscape where most baby boomers (Australians aged 65 or over) acknowledge the financial struggles faced by today’s youth, but are cautious about providing direct support that would impact their retirement comfort.

The study highlights several key insights into the attitudes of Australians aged 65 and older.

A significant majority, three in four, believe passing wealth on to their children is important.

Furthermore, four in five recognise their children face harsher or similar financial challenges compared to what they experienced at the same age.

Aussie baby boomers are cautious about financially supporting their children, new research finds

But, despite this awareness, seven in 10 are unlikely to adjust their lifestyles to support their children financially.

Additionally, while four in five are unprepared to downsize to release funds, nearly half would consider tapping into home equity if they could remain in their homes.

The research underscored a significant wealth gap between generations. Baby boomers have benefited from this gap for a long period of time, the report argued.

“This has largely been down to a decline in interest rates as well as good luck with asset prices appreciating over the last 40 years, like the family home,” AMP deputy chief economist Diana Mousina said.

For younger Australians, the financial landscape is starkly different.

Rising house prices and interest rates have made it increasingly difficult for them to save for a home deposit.

“It used to take six years to save for a 20 per cent deposit, whereas now it takes nearly 11,” Ms Mousina added.

While many older Australians understand the financial pressures faced by their children and express a desire to help, they remain cautious about taking steps that would reduce their own financial security. Most prefer to wait and transfer wealth through inheritance rather than make significant financial sacrifices during their lifetime.

The report highlighted 90 per cent of intergenerational wealth transfer happens through inheritance upon death.

When asked how they might support their children financially, the most popular response from retired Australians was providing a place to live in the family home.

This trend is contributing to a rise in multi-generational households, with research from the Melbourne Institute indicating that half of Australians aged 18 to 29 are still living at home.

Ms Mousina believes government intervention is crucial to bridging the growing wealth gap.

“What can be solved by policy is an improvement in housing affordability, and the main policy solution to improve affordability is to increase housing supply,” she said.

The financial services industry also has a role to play.

AMP director of retirement Ben Hillier emphasised a need for innovative solutions that can provide retirees with financial confidence.

“Providing retirees with the financial confidence that their savings will last not only helps them live life to the fullest but also gives greater clarity on how they can help their kids,” Mr Hillier said.

He suggested exploring new methods for retirees to unlock capital from their homes without downsizing or compromising their long-term wellbeing.