Bank of Mum and Dad: Generous now, struggling later

With the Reserve Bank of Australia lifting the official cash rate to 4.1 per cent and major banks forecasting further increases, the financial gap between younger Australians and their first home is widening. 

New research from Aware Super shows older Australians are feeling the pressure while also stepping in to help in growing numbers, often without the guidance to do so safely and putting their own retirement goals at risk.

The research, conducted by Aware Super, found that 98 per cent of parents and 96 per cent of grandparents are open to providing financial support to help a younger family member buy their first home.

But the research also reveals a significant gap between intention and preparation as well as awareness of government schemes designed to support first home buyers. 

• Around one in three parents and grandparents - 31 per cent - have already helped fund a first home purchase, most commonly through cash gifts toward a deposit. 
• Among those yet to help, 71 per cent say they are open to doing so in future. 
• Much of this support is happening informally, without full consideration of the tax consequences, the impact on retirement savings, super contribution caps, pension eligibility or how to support children equitably.
• For families seeking to buy their first home, the First Home Super Saver (FHSS)  Scheme - which allows eligible buyers to make voluntary super contributions and later withdraw them toward a deposit - had a net familiarity rate of just 26 per cent, compared with 54 per cent for the First Home Owner Grant and 49 per cent for the First Home Guarantee.

Aware Super CEO Deanne Stewart said the research painted a clear picture of a generation of Australians who wanted to do the right thing by their families but needed more support to do it well.

"Every day, Australians are making significant financial decisions to help their children and grandchildren get a foot on the property ladder and in most cases, they're doing it with the best of intentions but without a clear plan," Ms Stewart said.

"What our research tells us is that willingness is not the problem with almost every parent and grandparent we surveyed open to helping. 

“The problem is uncertainty and the list is long as they have to think about tax, retirement, and whether they can afford to give what's being asked of them.

"This is further complicated as the RBA tightens monetary policy and mortgage costs rise, with the pressure on families to bridge the deposit gap only increasing.

Ms Stewart said these circumstances meant it was more important than ever to ensure any support offered is structured, considered and sustainable.

"At Aware Super, we're committed to making sure our members have the information and guidance they need to help their families in a way that doesn't compromise their own financial future,” she said.

"Helping a child or grandchild buy their first home is one of the most significant financial decisions a family will make together and we’re committed to helping our 1.2 million members through this with the same care and planning as any other major financial commitment."

Ms Stewart added the low awareness of the FHSSS was a missed opportunity for many Australian families.

Under the FHSS, members can use voluntary super contributions to help save for the first house deposit and allow them to save faster through lower tax rates and potentially higher investment returns. 

It works in three ways: 

1. Add extra to your super through voluntary contributions up to $15,000 per financial year 
2. Maximum of $50,000 withdrawal across all years, plus interest and investment earnings on that money
3. Move into your new home within 12 months of funds being released 

"The First Home Super Saver Scheme isn't suitable for everyone, but for the right families it can be a genuinely useful way to accelerate a deposit using the tax advantages of the superannuation system," she said.

"The challenge isn't the scheme itself — it's that too few people know it exists or understand how it works and that's something we can address by actively working to help our members and their families navigate the unknown.

Aware Super encourages members who are considering supporting a younger family member into a first home to speak with a financial adviser or visit aware.com.au to understand their options. Families seeking more information on the FHSS scheme can visit https://aware.com.au/member/connect/super-for-first-home-deposit.