More Aussie parents are giving early inheritances to their kids to help them onto the property ladder. (Source: Getty)
A growing number of Aussie parents are giving their kids an early inheritance, with many keen to help the younger generation into an ever-increasing property market sooner rather than later. However it’s sparked a warning for parents to think twice about their generosity and not let it come at the expense of their own retirement.
An inheritance used to be something you’d leave your loved ones after you passed. But Perpetual Private senior financial adviser Elysse Lorenti said she’s seeing an accelerating trend of Aussie parents bringing it forward for their kids.
“They can see that they’re struggling. They can see that the conditions are much harder than it was for them when they were that age, and if they can afford to do it, they’re happy to do it,” she told Yahoo Finance.
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Lorenti, who is based in Sydney, said she was seeing parents giving their kids early inheritances of around $250,000 to $300,000 to help with a home deposit.
But the desire for Aussie parents to help out their kids is also “competing” with the growing SKI trend, or Spending the Kids’ Inheritance. As the name suggests, it’s where Aussies choose to spend their savings on travel, hobbies and living life, rather than squirrelling cash away for the kids.
“There’s definitely a bunch of people that think, nope, this is my money, my retirement, you’ll get what you get when I pass away,” Lorenti said.
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There is a $5.4 trillion wealth transfer that is set to take place over the next two decades as Baby Boomers pass property, super and investments to younger generations.
Australian Seniors research released in 2024 found nearly a third of Aussie parents aged over 50 had given financial assistance or an early inheritance to help their kids, including a home deposit, or help with a bond or paying rent.
While no parent wants to see their kids struggling, Lorenti said helping your kids into the property market shouldn’t come at your “own detriment” in retirement.
Homeowners aged 65 and over now need $77,375 annually for a comfortable retirement as a couple, according to ASFA’s latest budgets, and $54,840 for a single.
“You don’t want to be sacrificing your own retirement, especially if you’ve worked so hard throughout your life to build up a level of wealth to be able to retire and support yourself and enjoy yourself in retirement,” Lorenti said.
“You’ve already sacrificed so much by raising the kids and doing all of that to educate them and set them up for their own lives.”
The financial advisor says it’s important for retirees not to overcommit. (Source: LinkedIn)
Lorenti has found some parents will give their kids cash without thinking about the repercussions and can end up “overcommitting” themselves, feeling the impacts later in life. Others may be worried about what they can afford and end up delaying the decision altogether.
Lorenti said that’s where getting advice could be useful to figure out your current situation, the cash flow you need now and through retirement, and whether you can afford to give money to your kids and how much.
“It might be that you can afford to give to them, but maybe not the number you originally thought you wanted to give to them,” she said.
You also may be able to help out your kids in a different way if you can’t afford to gift a lump sum.
“You can also do it as a loan, which means kind of you’re giving them money, but you expect them to pay it back,” Lorenti said.
“Or the other thing, if you can’t afford to actually hand over money, you can be a guarantor for them. But there are risks that go along with that, and it’s important to get legal advice to make sure you’re well informed of those risks.”
If you are receiving the age pension, you’ll also need to be aware of how an early inheritance could impact your payments.
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