Is generosity putting your retirement at risk?

April 2 | 4 min read

When we think of all the things that could get in the way of a quality retirement one factor is often overlooked: Our children. Here’s a few tips from Vision Super and industry fund-owned ME Bank to ensure your retirement isn’t at risk.


Retirement holds plenty of promise, but along with concerns over personal health, the need to care for aged parents or just manage the cost of living, there is another ‘X’ factor that can derail the best laid plans – and that’s our kids.

It turns out plenty of young adults are taking a leaf from The Big Bang Theory’s Howard Walowitz by settling into the parental nest for the long haul. In fact, government figures show around one in three young adults aged 18-34 still live in the family home[1].

Sure, it’s not all bad having an adult child at home. After all, there’s always someone to water the pot plants when you head off on that round-the-world vacation.

But here’s the rub.

When adult children are finally ready to fly the coup, chances are they’ll need a financial helping hand to do so. And we’re not talking a few fivers to tip the furniture removalist.

One in four receive financial support from family

Research by ME conducted in 2016 revealed that 26% of first home buyers had received financial assistance from a family member to buy their own home. And the sums involved can be substantial with an average of $42,000 being loaned or gifted over the last five years.

With this sort of money involved it’s not surprising retirement plans can be derailed. One in four (28%) of those who have helped a family member into their first home say it has impacted their level of comfort in retirement.

Protect your financial wellbeing

Yes, rising property values are making it hard for younger Australians to buy their first home. But there are steps family members can take to lend a hand without jeopardising their own financial wellbeing.

1. Talk to experts

Consult Vision Super’s financial advisers, or access free services such as Centrelink’s Financial Information Service before making the decision the gift or loan funds to family members. Gifting cash in particular could impact age pension entitlements under the assets test. Agreeing to act as guarantor could put you at risk of becoming responsible for your child’s loan if they cannot keep up the repayments.

2. Keep your money working

Over the last five years 24% of family members who have loaned money to a first home buyer have charging interest on the loan. It can be a way to teach valuable lessons about money management while ensuring your cash earns an ongoing return.

3. Formalise agreements

Money can have a way of souring relationships. Protect your investment in your child’s first home by having an agreement drawn up that details whether you will be repaid – and when.

Importantly, do some serious soul searching about your adult child’s financial habits.  If you are confident he or she can handle a home loan offering fiscal support may not be such a bad thing. But if you have any niggling doubts be prepared to listen to your inner voice.

Members Equity Bank Limited ABN 56 070 887 679. 

[1] Australian Social Trends – ABS

* as rated by Superratings and based on account fees payable on a $50k balance.

General Advice Warning
This article includes general information and does not contain any personal advice. It is provided for general information only, to help you understand Vision Super’s products, services, policies and procedures. The information was correct at the time of publication, but may have changed since. It does not take into account your personal objectives, financial situation or needs. You should consider whether it is appropriate for you and your personal circumstances before acting on it and, if necessary, you should seek professional financial advice. Before making a decision to invest in any Vision Super product, you should read the appropriate Vision Super Product Disclosure Statement (PDS). Past performance is not an indication of future performance.
Vision Super Pty Ltd ABN 50 082 924 561, AFSL 225054 RSE Licence L000239 is the Trustee of the Local Authorities Superannuation Fund ABN 24 496 637 884. Level 15, 360 Collins Street, Melbourne VIC 3000. PO Box 18041, Collin Street East VIC 8003.
April 2 |  4 min read

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