April 5, 2026 — 5:00am
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Last week, I wrote about Australia’s fifth-biggest lender, the bank of mum and dad, and how parents across the country were digging deep to help their children buy houses. Often, they were doing this without a huge amount of planning or thought given to how it might affect them or their retirement.
Well, after a couple of lovely emails from readers this week, it turns out it’s not just the bank of mum and dad that’s doing some significant lending, but the bank of grandma and grandpa too (BOGAG? BOGMAGP? GAGBOG? Actually, you know what, let’s leave the acronym for this one).
It’s not just the bank of mum and dad providing money to the younger generation.Michael Howard
A timely bit of research from Australian Seniors shows just how many grandparents are giving to their kids and grandkids – and the issues it’s starting to cause. (And for those who might be grandparent age but without grandkids, this applies to you too!)
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On average, grandparents who provide support to their family are paying over $3000 a year, with more than half using their savings and superannuation to fund these stipends. Most of this money is for things such as gifts, but 33 per cent of those surveyed said they had sent money for emergency financial support.
What’s the problem?
The majority of grandparents said they did this purely out of love for their kids and grandkids, but there’s a hidden cost for some, with one in five saying they’ve been forced to delay or suspend their retirement plans to provide that support.
Providing financial support as a grandparent can put you in a tough position, as many feel obliged to, especially as their later years loom and the question of “who’s going to look after me” starts to come to mind. But helping your grandkids out at the expense of your own quality of life isn’t the way to go, and can end up leaving you with even fewer resources when you do get to your older years.
What you can do about it
So if you’re a grandparent struggling with how to balance your needs and your desire to help your grandkids, here are some tips:
Consider your own needs first: As mentioned, many grandparents feel it’s their duty to help out their families in some form or other, but if it’s going to impact your own situation negatively you may have to be realistic. Paul Green, director at Vincents Private Wealth, says it’s important to first determine what level of income and savings you need to maintain your lifestyle, then lock that amount away. “Once you know how much to protect for your own retirement, you can work with the rest,” he says. Over half of those surveyed by Australian Seniors said they’d cut back on personal travel or leisure activities to help out their family, so make sure you factor in things such as holidays when you work out how much you can afford to give away.Have a chat: Maybe you’ve been providing financial support for years, maybe you’ve never done it. Either way, sitting down with your kids (and grandkids, if they’re old enough) and talking about it can help you and them get some clarity. Clinical psychologist Dr Lyn Worsley says one topic that might be important to talk about is the nature of the support you’re providing, which for many grandparents, comes with no strings attached. Making this clear can benefit both yourself and your kids. “Generosity can sometimes become complicated. It’s important to check in with yourself and ensure that financial support is not unintentionally used to control or secure closeness,” she says. Along with this, it might be a good time to be open and honest about how your support will take shape. Think about the ways you’re willing to provide support – is it just money, or will you help with other things like school fees? And make sure you discuss how much you will give and how often, and set clear limits if needed. “Don’t just hand over money blindly, but work collaboratively with your family to raise everyone’s standard of living,” Green says. “Families who plan together almost always come out ahead.”Think about how you’ll do it: When it comes to helping out with bills or giving birthday presents, there’s nothing wrong with the ol’ pineapple in the envelope special. One reader who emailed this week says she gives her grandkids $1 a day − another valid option. But if you want to be a bit more savvy about giving – especially when it comes to grandkids – there might be better ways to go about it. If you want that money to do more work than just gaining interest – like investing it – you might need to be a bit more strategic. Investing on their behalf can trigger capital gains for you or them when you sell or transfer the shares when they’re old enough, and opening an investment portfolio in their name can see them slugged with a 66 per cent tax rate. Instead, Money guru Noel Whittaker has long been a fan of investment bonds, also known as insurance bonds, which are a bit like managed funds, however once you have held the bond for 10 years, any withdrawals made will not attract personal income tax or capital gains tax. You can also transfer them to another person without incurring CGT. “In many ways, investment bonds are like superannuation. The fund itself pays tax on behalf of the investor, which means there is no need to include any income in the investor’s yearly tax return,” Whittaker says.
Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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Dominic Powell is the Money Editor for the Sydney Morning Herald and The Age.Connect via X or email.From our partners