It’s understandable, in today’s tough housing market, that you want to give your children a leg up onto the first rung of the homeowning ladder. But before you do, stop to consider how it’s going to affect your own financial situation in your later years. That doesn’t make you selfish — just prudent. There are ways to support your children while still maintaining your own financial security in retirement.
Review your own financial situation first
Before you open a branch of the Bank of Mum and Dad, make sure your own retirement needs are covered. Calculate your expected retirement income — including superannuation, investments and any Age Pension eligibility — and estimate your current and future living costs.
It’s also important to factor in an emergency buffer and plan for a longer life expectancy. A financial adviser can help you work through these numbers with clarity.
Five options to help them buy
1. Hand over cash towards a deposit
Saving for a deposit can be one of the biggest hurdles for first-home buyers. A cash gift can make a meaningful difference — just ensure you’re only giving what you can comfortably afford, as this money is unlikely to be returned.
2. Give them a loan
If you’d prefer not to part with funds permanently, you might consider offering an interest-free or low-interest loan. It’s important to clearly document this as a loan (not a gift) and formalise the arrangement legally.
3. Become a guarantor
Acting as a guarantor can help your children avoid Lenders Mortgage Insurance (typically required when borrowing more than 80% of a property’s value). However, this arrangement is often secured against your own home, meaning you could be liable if they default. In the worst-case scenario, your own property could be at risk.
4. Share the ownership
If you have sufficient equity, you may choose to co-purchase a property with your child. This can improve borrowing capacity and allow you to share both ownership and potential capital gains. As with any joint arrangement, it’s critical to document everything clearly and seek both legal and financial advice.
5. Provide practical help
Support doesn’t always need to be financial. Allowing your children to live at home rent-free while saving, or helping them navigate the buying process, can be just as valuable.
Know the Centrelink ‘deprived asset’ rules
If you receive a full or part Age Pension, gifting rules apply. You can generally gift up to $10,000 per year, with a maximum of $30,000 over five years, without impacting your pension. Amounts above this may be treated as ‘deprived assets’ and still counted in your financial assessment.
Loans to your children may also affect your pension, as they are typically assessed as assets.
Avoid damaging family dynamics
If you have more than one child, consider how support is distributed to avoid perceived unfairness. You may choose to treat all children equally over time, or account for differences within your estate planning.
It’s also worth thinking carefully before gifting a property outright. While generous, it may remove a sense of achievement and financial responsibility that comes from contributing to the purchase themselves.
Seeking professional advice before making any decisions can help you avoid unintended consequences and choose the most appropriate approach for your situation.
If you’re thinking about helping your children into the property market and want to ensure your own future remains secure, our financial advisers can guide you through the options.
