How the bank of mum and dad can avoid creating spoilt brats
Are many young Australian adults over-entitled or victims of a fast-changing financial world? Here’s how parents can seek balance.
It’s not lost on parents that surging house prices and other living costs make it tough for their children to get ahead financially, and many are happy to help out, but some are increasingly worried about creating younger generations who won’t work hard for wealth.
Several recent studies – and even advertising campaigns – have pushed the theme of young adults waiting for the oldies to drop off the perch so they can claim their inheritance, but in today’s age of longer and healthier lifespans, the kids could be waiting until they themselves reach retirement age.
So how do we find a healthy balance that doesn’t create generations of children who are spoilt in more ways than one?
Ensure they work for money
Young adults are living at home longer, with University of Melbourne research finding 54 per cent of men and 47 per cent of women aged 18-29 still live with mum and dad. That’s a win-win for many families. But if the children are not doing any paid work, they are not living in the real world.
Sponging off parents, even if studying full-time at university, won’t teach them anything good. Most uni students hold down part-time jobs – almost 90 per cent of them, according to a 2023 student wellbeing survey.
It’s all part of the challenging juggle we call life, and a good work ethic is one of the strongest characteristics of successful people.
Help them learn
Financial advisers say today’s teens and young adults are becoming a highly financially educated generation through their use of technology and social media, and the rise of exchange-traded funds and easy-to-use investment apps and platforms.
A parent may only have to point them in the right direction to dramatically improve their financial literacy. There is so much free money advice, strategies and tips and traps to understand, all with just a tap on a smartphone.
Lead the way
Parents are powerful role models even after their children reach adulthood. Research published last year in Nature.com says parents help shape growing adults by transmitting their financial attitudes and behaviour through everyday interactions.
If mum and/or dad are couch potatoes with no drive to succeed, their teenagers and young adults are unlikely to be motivated to become vibrant entrepreneurs or successful investors.
Lend, don’t give
It’s great to use your money to make others happy, including family, but when it comes to big financial lessons for young adults, a loan is a much more powerful teaching tool than a gift.
It can always be an interest-free loan, but the idea of paying back borrowed money is vital for becoming a financially successful adult.
And beware about putting your own finances into debt to help cover the kids, a practice that is increasingly common in Australia. Research released this year by UBS discovered that payments to children are regularly $200,000.
Become property partners
Most parents know the value of home ownership, and should prioritise helping their children understand all available incentives for first-home buyers, and the step-by-step savings process that can build a decent deposit.
More young adults today are buying investment properties where tenants help cover their mortgage, and savvy parents can play a role here with good advice, a large interest-free loan or even a joint investment strategy.
Once anyone sees their property price rising and their loan reducing, they will most likely be hooked on real estate.
Don’t over-promise
It’s human nature for people to take the easy road if it’s laid out in front of them.
I once heard a rich private school parent telling a teacher that education was pretty pointless for his young daughter because she would never have to work in her life. Seriously?
A survey in August by Colonial First State found almost half of 18- to 29-year-olds expect an inheritance, with an average anticipated windfall of $525,000.
Parents should not be promising too much wealth to their children, because it’s a disincentive to succeed on their own. And nobody knows what anyone’s financial future holds.
Remember that they struggle too
The internet is full of stories of young adults grappling with the loss of their childhood comforts, and feeling too guilty to speak up for fear of being labelled a spoilt brat.
When younger generations see their parents and grandparents hoarding wealth while they live on Struggle Street, it can be crushing. Balance, communication, love and financial knowledge are the keys to keeping the children grounded.
More Coverage
Parents and grandparents across Australia argue we live in a new age of entitlement as more young adults ask the “bank of mum and dad” for money.