With house prices forcing young people to save for longer to get a foothold in the property market and some of us putting off retiring, some Australians are turning to their families for the financial help they need. And it can be a great idea.
Listen to Susan talk about how her family has helped each other out financially.
Bronwyn, 28 and her husband Tom, 35, live in Canberra and have just celebrated a year of marriage. In order to save for their wedding last year, they both moved home to live with their parents and rented out the house they had been living in.
"We knew that we wanted to pay for the wedding ourselves", says Bronwyn, "but paying a mortgage down at the same time was making it difficult to save. Both our parents knew they couldn't necessarily help us financially with the wedding, but they could offer us a year of rent-free accommodation so that we could put aside what we needed. It was difficult living apart for that time, especially when we were just newly engaged, but we knew the long term result would be worth it, with a wedding that we paid for entirely on our own, without having to fall behind on mortgage payments or rely on credit cards".
Jocelyn and Rick are a semi-retired couple in their early sixties. They've paid off their house and have managed to build a decent nest egg. Concerned about the unaffordable property market and their children's ability to save a deposit while they're renting in Sydney, Jocelyn and Rick have decided to help their two sons (Zac, 26 and Elijah, 31) by providing them with a down payment.
"Obviously when we're gone they'd stand to receive some money, but by that stage they won't need it as much as they do now", explains Jocelyn. "Rick and I didn't need our big house anymore so we downsized and moved to our holiday home on the South Coast, which was always the retirement plan. With some of the profits from the sale of our Sydney home, we were able to give the kids a sizeable down payment, which helped them get a competitive mortgage and a foothold in the market".
Paying it back
One of the benefits for parents that help out their kids out financially when they need it is that later in life, when those parents need more support, be it financial, physical or emotional, their children are in a more comfortable place and are more able to do it. Mike and Louise, who live on the Sunshine Coast, have converted their bottom floor into a granny flat for Mike's mother, Jan, to live in. "After dad died, it wasn't just the financial situation that mum needed help with", explains Mike, "she also needed company". "After forty years with a companion, you can't just go to living alone. Mum and Dad helped me out with a deposit when I bought my first unit, and it was always just in the back of my mind that one day I'd be able to repay the favour. It's great having her live with us, the kids love having Nanna downstairs, and I love knowing that she's looked after".
How have your family helped you out with money?
These case studies are provided for illustrative purposes only, based on a real life examples (names and some details have been altered). It provides an overview or summary only and should not be considered a comprehensive statement on any matter or relied upon as such. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.
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Having a child is one of life's most rewarding and transformative experiences. But it can also be stressful.
This information is current as at 24/09/2013.
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.
Diana Saad is a representative of Westpac Banking Corporation ABN 33 007 457 141 AFSL & ACL 233714.
For illustrative purposes only. Based on a real life examples.