The Bank of Mum and Dad has become so large as a home loan enabler that the Productivity Commission says if it was an actual bank, it would be the 5th to 9th biggest ‘bank’ in the country. However, one day it could be rivalled by the Bank of Kids!

That’s the conclusion of some unique research from AMP that says “half of people under 40 expect to financially support their parents as they age and are not relying on the Bank of Mum and Dad, despite rising housing unaffordability fears.”

The abc.net.au tells us from 2017, up to 60% of first home buyers were receiving some form of financial help from parents to buy a property. This is a big jump from 2010 when it was about 12%.
Joey Moloney, deputy program director at the Grattan Institute’s economic policy program, says the ‘bank of mum and dad’ is “growing in importance”. It has become so well established that, in 2020, it was by one measure the fifth largest mortgage lender in the nation.
The Guardian.com reports that “…data compiled by Martin North, principal of Digital Finance Analytics, showed that 26% – or 25,000 – of last month’s first-time buyers received help from parents, making them the nation’s tenth largest lender in June.” North says first-time buyers were “increasingly financially leaning on grandparents and other family members as well as parents, he says, but there is no straightforward way of knowing just how much.”

Some ‘kid-borrowers’ either get their parents to be guarantor lending 5% for a deposit, while others rely effectively on gifts. Of course, these borrowers are lucky to have parents who can play bankers.

The flipside of this story is those parents who aren’t in a position to lend. While many parents have benefitted from surging home values since the 1980s, many of this group have really low super balances. Proving this point, the Association of Super Funds of Australia (ASFA) says “around 75 per cent to 80 per cent of individuals have balances below $500,000 around the time of retirement.” Making these low balances more problematic in the future for young people of today is the revelation that over the past decade, life expectancy increased by 1.3 years for males and 1 year for females. Men are expected to live to 81.2 on average, while females are tipped to live to 85.3.

Putting all this together suggests there is a high likelihood that younger Australians might have to help their ageing parents.

Given all this research by AMP on intergenerational wealth, it’s not that surprising that one in five young Aussies is relying on financial assistance and inheritance from parents for their future financial security.
But even more controversially, AMP director of retirement, Ben Hillier, has revealed the following: “It’s also evident that while many Australians under 40 are concerned about housing unaffordability and its impact on their long-term wealth and retirement, they are reluctant to ask for financial support from their parents, with many actually believing they will need to financially support their parents as they age.”
Interestingly, Ben Hillier underlined a big problem for many normal people that
the research revealed “a lack of communication between the generations on wealth matters” wasn’t a positive characteristic that’s good for wealth generation or preservation.
Polite society has historically said it was rude or gauche to talk about money. However, anyone who has made money knows it often has come from learning from those who have made money in the past. And they’d probably advise you to be gauche if you want to be rudely rich!

If more people were rude on money, less young people would need their mums and dads, while fewer older people would be looking for help from their kids in the future.