Australian parents are finding it tougher to provide financial assistance to their adult children in the wake of the GFC, but most Gen Ys are still expecting their parents to support them as they continue living at home well into their early 20s.
These are the findings of a survey commissioned by St.George Bank of more than 1,000 Australians. The survey shows 50 per cent of parents are unable or unwilling to provide as much financial support to their kids now that their nest eggs are smaller and their plans for retirement have been put on the back burner.
More than 70 per cent said they had helped their kids out with free or subsidised board at the family home, education costs, assistance with rent or buying their first home, paying for all or part of their weddings and funding large one-off expenses such as overseas travel.
The global financial crisis has hit hard with superannuation funds expected to post their largest losses in the history of superannuation for the 2009 financial year and the stock market losing $350 billion of wealth in the same period.
Gen Y are yet to fully understand the impact on their parent’s financial security, with 65 per cent admitting they have no idea where their parents stand financially and 62 per cent saying they expect mum and dad to continue supporting them into the future. Think again, kids!
One of the most significant financial contributions parents can make to their children’s futures is funding part or all of the deposit on their first homes. We saw a lot of this towards the end of the property boom earlier this decade when prices increased beyond young people’s reach. It’s happening again now because of the boost to the First Home Owners Grant.
However, there will be many parents who can’t afford to do this in a post global crisis economy, which raises the question of how this will impact the Australian property market?
Young adults will stay at home longer. If they can’t afford to rent, or lack the motivation to find rental accommodation, they’ll remain within the comforts of the family home. Many young people say they’re staying at home to save for a deposit but mum and dad usually still kick in a large proportion. Without this assistance, it will take longer to save the full deposit.
Young adults will rent for longer. Those who do leave home will rent for a longer period of time as it will take longer to save a full deposit. We may see more young people seeking shared accommodation, as it is usually cheaper to be among four or five people renting a house than two people renting a unit. Either way, this will put pressure on rental vacancies, already at historic lows, which will mean higher yields for investors.
Young adults will buy property much later in life. Without mum and dad paying all or part of the deposit, Australia’s first homebuyers will get older. Today, the average age is 33 years – up from 30 years in 1988, according to the Australian Bureau of Statistics. This will reduce demand for properties under $500,000 but investors will likely take up the slack as they return to the property sector.
Four out of five parents wish their kids were more responsible about planning their futures. Their main bone of contention is seeing them spend large sums on non-essential items, such as buying the latest mobile phone, or expensive clothes.
My advice to Gen Ys is to think outside the square. There will always be opportunities to buy within your price range, so be creative and do your homework.
Parents deserve their empty-nester years – it’s a time for them to focus on themselves and their retirement after spending 20 to 30 years raising a family. Gen Y needs to stand up – perhaps this might provide the impetus for them to do just that.
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