Three Generations, One Goal: Helping Young Australians Buy Their First Home
There’s a growing issue facing families today, and it spans three generations. At the heart of it is the younger generation—the first-time homebuyers—who are struggling to break into the property market. This challenge isn’t just theirs to bear; it’s one that also involves their parents and grandparents, who want to see them succeed but are grappling with how to provide the right kind of support without overstepping or creating dependency.
The Housing Affordability Crisis
Let’s face it: Australian house prices have skyrocketed in recent years, and for many young people, the dream of buying a home feels out of reach. Even though banks are often willing to lend the required amounts, we, as parents, can’t ignore the potential consequences of saddling our kids with $500,000 or $600,000 (or more) in debt.
This level of borrowing could strip away the flexibility to make important life choices—like starting a family, working part-time, or simply enjoying life without the shadow of crushing financial obligations. So, while the dream of home ownership is important, it can’t come at any cost.
A United Approach: Three Generations Working Together
What’s clear is that the younger generation often needs help to get ahead. But how can parents and grandparents provide support without simply handing over a lump sum, which might remove the sense of accomplishment and the lessons that come from building something yourself?
I love Peter Thornhill’s quote: “Don’t steal your kids’ dreams.” It’s a reminder that the challenge of saving for a deposit, of working together as a young couple or individual, is part of the journey and sets the tone for future financial success. It’s about learning to spend less than you earn—a fundamental rule for building wealth.
So, how can the older generations help without stealing those dreams?
The First Home Super Saver Scheme: A Tax-Effective Solution
One way to guide and support young people is through the First Home Super Saver Scheme (FHSSS). This government-backed initiative allows first-home buyers to save for a deposit using salary sacrifice contributions to superannuation, which are taxed at a flat rate of 15% rather than their marginal tax rate. Over time, they can withdraw up to $50,000 (plus earnings) as individuals, or even more as a couple.
Parents and grandparents can assist by helping to cover the after-tax shortfall in cash flow, enabling the younger generation to save for themselves but in a tax-efficient way. It’s a win-win: they learn the value of disciplined saving, and you help maximize their efforts without simply handing over a deposit.
The Role of the Bank of Mum and Dad
While it’s true that parental and grandparental assistance—sometimes referred to as the “Bank of Mum and Dad”—can contribute to rising house prices, it’s not a new phenomenon. I’ve seen it play out for decades in my financial planning practice.
There’s always the option to provide a lump sum at the time of settlement or after the deposit has been built, but the key is to balance this with careful consideration of your own financial future and the respect of money for the younger generation.
Balancing Generational Needs
One of the most critical factors for parents and grandparents providing financial support is ensuring they have enough for their own needs. This includes:
• Meeting retirement income requirements.
• Covering future aged care costs, which can include expensive accommodation bonds and ongoing care expenses.
In my practice, I rely on detailed financial projections, factoring in conservative returns, to guide families through this process. It’s about finding a balance where everyone—across three generations—can work towards the shared goal of homeownership without compromising the financial security of the older generation.
Building Habits That Last
At the end of the day, saving for a home deposit takes time and discipline. The younger generation needs to learn the value of regular saving, patience, and living within their means. These habits will serve them well—not just in achieving homeownership, but in every financial goal they set throughout their lives.
Final Thoughts
The three-generational challenge of helping young people into the property market requires careful planning, communication, and a united effort. By working together, families can help secure the stability and security of homeownership for the next generation, while safeguarding the financial well-being of the older generations.
Remember, saving is a journey, not a sprint—and the lessons learned along the way are just as valuable as the goal itself.
