The 'bank of mum and dad' is increasingly providing cash assistance to struggling younger Australians, helping with living expenses and mortgage payments amid the cost-of-living crisis. The informal system, estimated to be between the fifth and ninth-largest lender in Australia, is seeing large sums transferred, often exceeding $200,000, to assist with homeownership.
The bank of mum and dad appears to be moving increasingly from a mortgage lender to an ATM – a cash provider to bail out families trapped in the cost-of-living crisis.
But the size of the amounts provided by parents to get a foothold in the property market was particularly notable: the bulk of these transfers were greater than $100,000 and many were in excess of $200,000. Grandparents are also becoming a meaningful contributor to family finances, often called on to pay for education or extracurricular activities like music lessons. The UBS survey says they now account for 14 per cent of these financial “transfers”.It is hardly surprising that the bank of mum and dad has been estimated to be between the fifth and the ninth-largest lender in the country, with about $35 billion in loans.
In decades gone by, Schellbach says, it was only the mega rich who were in a position to help their children buy homes. While the pre-death intergenerational wealth transfer via the bank of mum and dad makes sense, it isn’t without societal pitfalls. It creates a divide between those with parents with excess cash to hand their kids and those without.
BANK OF MUM AND DAD COST OF LIVING HOUSING MARKET FINANCIAL ASSISTANCE INTERGENERATIONAL WEALTH TRANSFER
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