Why 'the bank of Mum and Dad' isn't helping anyone

The trend for parents to continue to give money to their offspring well into adulthood is bad for young people as well ...

The trend for parents to continue to give money to their offspring well into adulthood is bad for young people as well as old, writes Gabrielle Lane. Photo: Stocksy

In the spirit of full disclosure, I should tell you that I have at one time or another received financial support from my parents. Cash. Sometimes solicited. Sometimes unexpected. And, when I was in my early twenties and interning in media, it was always accepted gratefully to subsidise food, rent - and occasionally, shoes.

However, as the spotlight falls on the potential shortfall in the superannuation savings of women (the Australian Securities & Investments Commission suggests that in 2013-2014, females aged 60-64 had on average less than half the available account balance of men), it's time to acknowledge that it's not just career breaks to have children that can affect savings - it's the trend for parents to continue to give money to their offspring, well into adulthood. What's more, it may not be beneficial for young people either.  

Figures from the Australian Institute of Family Studies indicate that up to two-thirds of parents may be giving money towards living costs, or as a loan or gift to children in their mid-twenties. "There's been a trend over time for parents to support their children into adulthood for longer than was the case in previous generations. Financial support is one way, and practical support such as [allowing] adult children to continue to live in the family home, is another," says Anne Hollonds, director of the AIFS.

"The proportion of 25-year-olds still living in the parental home has doubled from one-in-six in 1976, to almost one-in-three today," adds Mark McCrindle, senior researcher and principal of McCrindle Research. "The main reasons for this dramatic change are economic - young people today are far more likely to be in the education system later in life than the previous generation were. Not only are they delaying their earning years, but the costs of moving out of home are significantly higher than those faced by previous generations because of the much higher house prices and resulting rental costs. And so, financial independence occurs later in life."

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However, the 'bank of Mum and Dad' is no solution. Firstly, not everyone can afford to help out their children. Let's not forget that both generations weathered the global recession of 2007 and with it redundancies, restricted borrowing and comparatively low interest rates for savings. Financial planner Claire Mackay agrees: "The big questions that clients have are 'do I have enough money to retire?' and 'how can I help my children?' But, there's no point in helping your kids to the detriment of your own financial security - especially if by providing support, in a few years' time you're going to need your children to [help] you."

Secondly - from someone who was routinely well-dressed and overdrawn three years into my first job - hand-outs don't tend to foster good behaviour patterns.

"If adult children get into financial difficulty because they're in debt or can't support their lifestyle, then bailing them out isn't a gift, it's prolonging the issue," says Mackay. "Every parent wants to give their child a better life than the one they had, but the best gift you can give your children is the knowledge of sound financial planning."

Having to do things for yourself, makes you better at it. At the age of 24, engineer Hannah Amos is entirely self-sufficient and has a five-page expenditure spreadsheet to prove it. But, she admits it puts her at odds with friends whose expenses are part-funded by their families.

"Financial independence is important to me and it definitely makes me more responsible than friends who are given money by their parents," she explains. "I use my debits and credits to forecast how long it will take me to save a set amount - I'm saving for a house at the moment. But, I have friends whose parents have given them money and they've maxed out their credit cards. The money goes on fashion, going out and looking good. They don't understand why I don't have the flexibility to do things flippantly - but I know what I can and can't spend."

The impact extends away from the balance sheet. Before we accept cross-generational financial help is a natural solution to the rising cost of living, we need to understand what might actually be going on, on a psychological level. Frustration. Dependency. Immaturity.

A new review of research into so-called 'boomerang' families, in which an adult moved back in with their parents, highlighted that the dependency can trigger the behaviours of youth. "It's important to establish mature relationships with parents as reinforced roles from their youth can stifle personal development." says associate professor Cassandra Szoeke. "Mostly negative experiences come from interpersonal conflict stemming from a mismatch in understanding roles and responsibilities."

Of course, there are situations in which financial help is unavoidable or support is positive for mental well-being. But it's precisely when young people are able to support themselves but don't that can trigger insecurity and ineffectiveness.

"For an unemployed young adult or a gainfully employed older adult, a reliance on parents for financial stability, whether that be living with parents or receiving financial support, is likely to be disempowering," says psychologist, Stuart Watson.

For me, the turning point in becoming financially responsible came when I realised that having your own savings, if you are able to, gives the biggest sense of freedom and happiness. And while most of us now strive to be financially independent of a partner, there's no value in being dependent on other family members instead.