Money experts’ big warning to bank of mum and dad

With Aussie parents differing wildly on how much to gift for their children’s home deposit, money experts have issued a stark warning on what could do wrong.

Many young Australians are now priced further out of the market given recent property price surges, requiring more time to save up deposits.

Half of Aussie parents will gift $1000 or less for their children’s home deposit, as experts warn the bank of mum and dad to “put their oxygen mask on first” as times toughen.

Finder money expert Sarah Megginson said many young Australians were now priced out of the market given recent property price surges, and would not be able to buy without assistance.

But parents had an obligation to “put their oxygen mask on first” and consider their own financial situation as times toughen.

Parents run the risk of hurting their retirement fund if they’re not careful.

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“The risk is that the parents who contribute to their children’s property purchase could do so to their own detriment, hurting their retirement fund and potentially running out of money later in life,” she said.

“It’s important to consider whether you are financially secure before helping family members and look for ways to work towards a mutually beneficial outcome.”

“For instance, you might pledge to match your kids’ home deposit savings dollar-for-dollar which gets them into the habit and discipline of saving, and means you don’t have to contribute as much. “

Sarah Megginson is Finder’s money expert.

Finder’s Parenting Report 2023 surveyed 1033 parents of children under 12 to see how much they were considering gifting them to help buy a home.

It found of those willing to give more than $1000, the average they were planning to fork out was $33,278 – which was about a third of the average first homebuyer deposit level in March 2023 for a loan of $481,368.

The highest of those willing to gift more than $1000 were parents in Victoria ($52,716), followed by South Australia ($44,656), New South Wales ($40,191), Queensland ($36,497), and Western Australia ($31,076).

Housing prices have escalated across the country for both established and new homes.

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Ms Megginson suggested parents who were in a position to help, also support them with financial literacy.

“Buying a home also comes with new responsibilities such as managing hefty council rates and strata fees, paying for ongoing repairs and managing your money,” she said.

“Asking your kids to prepare a household budget will ensure they’re equipped to handle further rate rises.”

How much do you think you’ll gift your kids to help them buy a home?

New South Wales $40,191

Queensland $36,497

South Australia $44,656

Victoria $52,716

Western Australia $31,076

Source: Finder’s Parenting Report 2023.

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Originally published as Money experts’ big warning to bank of mum and dad