The Bank of Mum and Dad

Unknown · 00:00Jase: Welcome to another episode of The Numbers Game. I'm Jase. I'm here with my good friend Nick. How are you, mate?

Unknown · 00:05Nick: Jase, I'm good. Going well. Looking forward to today's episode and, you know, to take your words, give you some free advice by the sounds of it.

Unknown · 00:14Jase: Yeah, I'm looking forward to it. I think I've got some questions. What are we talking about today?

Unknown · 00:19Nick: Something that came across my desk this week, which I was astounded actually. I'll ask you a question first. Who do you think the top 4 lenders are in the country?

Unknown · 00:30Jase: I'm going to go Commbank, Westpac, ANZ, and NAB.

Unknown · 00:35Nick: Yes. Who'd be number 5?

Unknown · 00:39Jase: I'm going to go Macquarie as the 5th.

Unknown · 00:41Nick: Very good.

Unknown · 00:41Jase: Yeah.

Unknown · 00:42Nick: But top 5 from a bank point of view. The number 5th lender in the country is the bank of mum and dad.

Unknown · 00:51Jase: That seems like a big number.

Unknown · 00:53Nick: So there's a trend at the moment, which, you know, which you would know about, where people are leaning on their parents to get leveraged into properties, whether that be support with a deposit or even beyond that through guarantor loans, through cash, via a gift or whatever it might be.

Unknown · 01:10That is now the fifth largest lender. The bank of mum and dad is the fifth largest lender in this country. So you've basically got— this is what I was thinking about— you've got this wealth transfer that we've been talking about.

Unknown · 01:26We spoke about that previously, about the $5 trillion.

Unknown · 01:29Jase: Yep.

Unknown · 01:30Nick: It's kind of already happening and it's happening so parents can get their kids, grandkids, nephews, nieces, if they're really generous, into property. And this is happening a lot in our business. We see it all the time. Number one, it gets them into the market quicker.

Unknown · 01:46Number 2, it could save them a lot of money in regards to mortgage insurance. In some cases, sort of $30,000 to $40,000 if you're buying for $1,000,000, if you've got a guarantor. So it's this thing that's gathering momentum. It's been around for quite some time. I just wanted to have a chat about it today and discuss the pros and cons and mainly the cons, particularly in relation to mum and dad, because as we know, you would do anything for your kids.

Unknown · 02:13And I think the concern that people have, particularly financial planners or people that are advising the mum and dad, is, is this actually going to have a negative impact on your ability to fulfil your dreams or, you know, your goals and objectives?

Unknown · 02:33Jase: Well, I've definitely seen it go pear-shaped as well. And I think it's once you've seen some of the horror stories of parents doing something for the kids and then even when you've got siblings and there's some inequity across, you know, multiple children. Yeah. Or, you know, if something goes wrong with a job, if if it was relying on the parents having a job to service on their end.

Unknown · 02:51Yeah, there's all sorts of loopholes and tricks to it. So yeah, interested to know more.

Unknown · 02:56Nick: It's one of those things that I don't think— even if parents know what the consequences could be, they're still going to make the decision that they think is going to benefit their children. I believe though, if they have the knowledge of what could go wrong, or at least if they have an understanding of how it impacts, if there is any impact or there might not be any impact to their plans, I think people are going to be way better positioned to make the right call.

Unknown · 03:22And you might actually have more people say yes if they understand the impact on their financial position. And that's the flip side of it.

Unknown · 03:32Jase: Yeah, 100%. I think it's the whole thing of knowledge is power. And a lot of people go into this blindly because of the love, the idea of, you know, I love my children, I want to help them. And that's okay to want to help your kids. But there's also looking after yourself first. The oxygen mask in the plane, you put yours on before you put on someone else's.

Unknown · 03:49So I think it's getting that understanding first to go, how does this impact me in 10 or 20 years? And if you are approaching retirement age, you know, every extra bit of money into super or plan for retirement can have a huge impact. So, you know, if you are putting towards your children's future, which I'm not saying it's a bad thing, it's just understanding how big that impact could really be.

Unknown · 04:10Nick: For sure. And I think it's important to understand the stats because this is why this could become a a problem for some people because it's gathering massive momentum. So as I said before, it would rank as Australia's 5th largest lender if it were actually a bank, which would be bigger than Macquarie from a lending point of view.

Unknown · 04:29$35 billion annually in parental contributions to property purchases. Now that was mind-blowing for me. 60% of first homeowners in major cities rely on family. To get into the market, family money. The average parental contribution nationally is just over $33,000, frequently hitting $100,000 in areas such as Sydney and Melbourne and probably, you know, particularly Brisbane and Perth now flying, they'd be very similar.

Unknown · 04:58Jase: Is that a combination of gift versus guarantor or there's a bit of everything's working to that number?

Unknown · 05:04Nick: Combination. Everything's working. 75% of parents do it as a gift. Here we go. Not a loan. Yep. Which means there's cash transferring hands. 1 in 20 parents are risking financially stable retirement due to giving their children help.

Unknown · 05:22This is crazy for me. 6% have gone into debt to help their kids or grandkids buy property. So they're actually going and getting the loan themselves, which to me is madness. 2% have taken reverse mortgages.

Unknown · 05:36Jase: Oh, that is madness.

Unknown · 05:38Nick: That is madness, but I don't, I've got a theory on that. I don't think that's as mad. No, we can talk about that. And of those people who do take the reverse mortgage, 64%, they're 64% more likely to experience mortgage stress. And the other thing is it's an unregulated lender.

Unknown · 05:58So if you do a guarantor loan through a bank, that is regulated. But if you are gifting your child money, that's unregulated. So there's no checks, there's no balances. It's just done purely on love and a hope that you'll pay them back in most circumstances.

Unknown · 06:13Jase: And often these things are very much unrecorded, not documented. It's, you know, verbal. I'll give you this now, you know, give me back when you can. But when you can is a very loose, loose term.

Unknown · 06:24Nick: I think when you go into these things, you always go in with good intentions. But at the same time, we're talking about a lot of money changing hands. So yes, you go in with good intentions and yes, you do everything you can to help your children, but at the same time, you need to understand the what-ifs.

Unknown · 06:40So what I want to talk about today is what could go wrong, number one, and number two, what are the things that you can do, not just as a parent, but also as a child looking to leverage from their parents, go in with, you know, an educated view on what could go wrong.

Unknown · 06:56And then from there, you put the right checks and balances in place so everyone lives happily ever after.

Unknown · 07:01Jase: Sounds like a plan. And we'll have a specific section we can cut. I'll send to my dad and he can help me get into a property in Melbourne at the moment. So.

Unknown · 07:09Nick: Well, happy days.

Unknown · 07:09Jase: Sounds like a plan.

Unknown · 07:10Nick: So he's not listening. He's not listening. Maybe someone should call him and get him on. But we can send him the recording. I think it's on Spotify and YouTube, Tommy. So I'll pass it to you 'cause you mentioned a few things that could go wrong.

Unknown · 07:26But what do you think could go wrong in not just a guarantor situation, but a lending money to your children scenario?

Unknown · 07:34Jase: You see and hear it all the time of fractured relationships between, you know, family members. So I think any time where there's money involved as well, it can create additional stress and strain on relationships that wasn't there beforehand. So I think, you know, family breakdowns. I also then look at, you know, husband and wife, you know, parents who loan money to their child to buy a property, but maybe they don't necessarily love the person their child has married.

Unknown · 07:59And if there's relationship breakdown, how is that then factored into a divorce settlement? One particular parent contributed, you know, 6 figures, up to $100,000 towards purchasing a property. That property's gone up in value. You know, is there anything worked into making sure that the appropriate amount of money goes back to parents?

Unknown · 08:17But obviously, where undocumented, it becomes quite hard. And then, yeah, the ones that I always worry about, I mean, we talk to, we have a lot of clients that are between the age of 45 and 65 and constantly talking about superannuation and going to seek advice on their retirement.

Unknown · 08:33So I think as well, just the financial impact of, not taking care of yourself first. They're probably some of the main ones I think of.

Unknown · 08:40Nick: Yeah, all really good ones. And I think the other one, probably the only one that you missed, is the financial circumstances of the child changing. So job loss, sickness, you know, children getting sick, all these things that we see all the time where someone either number one loses their ability to earn an income or number two earns an income and something happens in their life and they do the wrong thing with it.

Unknown · 09:04There's so many vices that people have access to now that can lead them down the wrong path. So you nailed the relationship one. And one of the key things is the, you know, you might be very content with your own relationship, but if you've lent money to children and they have a relationship that breaks down, it's, you need to have it documented as to how that's coming back.

Unknown · 09:27And one of the things that you said there that really resonated with me, 'cause I've experienced this not just with clients but within family, as well that things do change when money's involved, even when you least expect them to. So it's very important to get agreements in place when everyone's friends.

Unknown · 09:43So, you know, these agreements in business is the same, right? Same with the shareholders agreement. You get them done when everyone gets along. So there's ever a time when they don't get along, it's black and white as to what's gonna happen.

Unknown · 09:55Jase: It's amazing how many times we have that conversation with a business owner. They go, "No, no, no, we're all good." And then a couple of years down the track, something blows up and where's that shareholders agreement? So yeah, same thing applies for family.

Unknown · 10:05Nick: And this is no different. A couple of things that you should consider if you're doing this, and again, I'll— I really want to harp on the point that this isn't just about mum and dad. This is about the children and the children making sure that they're going into this with their parents with all the boxes ticked.

Unknown · 10:24Because in most cases, the children won't want to have a negative impact on the parents. So it's important they're just as educated on this in regards to protecting their parents. And as I said earlier, it might actually give the parents more confidence to say yes if the right education is there.

Unknown · 10:41Key things to consider as a borrower, a child or a parent, but do I or do my parents need this money to fund my retirement? Now, the answer to that is yes, you should definitely not lend because even though you will go into this scenario or transaction with a view to get the money back.

Unknown · 11:03You cannot guarantee that. So how would one typically get the money back to their parents? They generally won't pay it back because if you've taken out a bigger mortgage, in most cases your first mortgage, you've got a big repayment that you never had before.

Unknown · 11:22If you've then— let's just pick a number here— you borrowed $900,000 from the bank, you've borrowed $100,000 from your parents. If you've got to pay that $100,000 back in 2 to 3 years' time, it's just not going to happen because people won't have the cash flow to get that amount of money back. So quite typically what happens in these situations is the parents go guarantor.

Unknown · 11:41So they will leverage against their property and it's a limited guarantee. So they're only guaranteeing the amount that their property has been leveraged to help the kids with a deposit. What traditionally happens is the kids will try and accelerate the debt reduction on their house. They might even do some renovations.

Unknown · 11:58So accelerate debt reduction, increase value. And when that property is in a position to stand on itself, on its own two feet from an equity position, they will refinance and they'll release the title of Mum and Dad's house.

Unknown · 12:11Jase: And that's relatively straightforward from a refinancing point of view?

Unknown · 12:15Nick: Relatively straightforward from a refinancing point of view. What you see often is people go in with a 2-year plan and they kind of forget about it until something comes up. Such as another sibling wants to do it or the parents need to sell the house.

Unknown · 12:26Jase: Yeah. Yeah. Because that would impact, obviously they can't move, they can't reassign that guarantor. That's right. As in the purpose, like when they sell one to move to another, that's not justified.

Unknown · 12:34Nick: Well, the bank effectively has that title. Even though it's a limited guarantee, the parents cannot sell that house and cannot remortgage that house with most banks because that existing bank has a title. So whatever amount of money that property is guaranteeing will have to go back to the children's bank.

Unknown · 12:51Jase: Noted. Dad can't move out for a few years.

Unknown · 12:52Nick: Yep.

Unknown · 12:55So where I was going with that is there will always be a plan. So there'll be a 2-year plan to create the equity, 3-year plan, 4-year plan, whatever it might be. But at the same time, there's no guarantee on that because you're generally relying on accelerated debt reduction because in that first 2 to 3 years of mortgage repayments, you don't move your mortgage much at all, almost zero, because such a big component of your repayment is interest.

Unknown · 13:20So you're really relying on the market going up or you're relying on creating equity in other ways such as renovations. But then that requires cash flow at the same time.

Unknown · 13:29Jase: Yeah.

Unknown · 13:30Nick: So if your parents have a plan to retire in the next, you know, in the medium term, say 5 to 10 years, I'd say 5 years or under, this is definitely not for them. If they need that money for retirement and in most cases, we've spoken about this in prior episodes around retirement, but a big part of the baby boomer population, a big part of their retirement is their home.

Unknown · 13:55They sell their home for $2 million. They put a big chunk of that into super, which helps fund their retirement. They downsize. So they might take $1.2, $1.3 million, and they will then put that money into a new house. So they've got a big super balance and a house with no debt, a smaller house with no debt.

Unknown · 14:14If they needed to sell that property, and their kids were not in the equity position to take that debt back over, that amount of money would need to be repaid.

Unknown · 14:25Jase: Wow.

Unknown · 14:26Nick: So let's talk about your dad. I'm just picking numbers here. This is by no means his numbers, but he sells for $2 million. There was a $200,000 guarantee on the house.

Unknown · 14:36Jase: Yep.

Unknown · 14:38Nick: For the kids, the deposit or the 20%, if they used his house for 20%, the kids, talking about you. Yep. He sells that house for $2 million. He goes to you and you say, "Oh, Dad, we haven't paid much off. We bought in Melbourne. If anything, the market's gone backwards." Been travelling overseas too much.

Unknown · 14:54Jase: Yep.

Unknown · 14:54Nick: Yeah. Sounds about right. Wasn't really thinking about you. So we really haven't got any room to move from an equity point of view. The bank will need that money back that he guaranteed to release the title for him to sell and downsize. So in that scenario, he could have $200,000 less than what he thought he would, he was going to have.

Unknown · 15:13Now, if he had a plan to do a contribution to super, what's called a downsizer contribution, which a lot of people do, there's a time period in which you can do that post-selling your house. So that could impact his ability on in getting that money into super full stop because he could have had a certain money, a certain amount of money set aside that was going to go into super.

Unknown · 15:35A certain amount of money he was going to use to downsize. If he can't get access to all that, his downsizer price isn't really going to change because he's going to know where he wants to live. What will change is his ability to contribute to super. And as I said, you've got a window post-selling your house to do that downsizer contribution, then you lose the ability to do that.

Unknown · 15:53So very important that you understand your own circumstances as a retiree, whether that be through a financial planner or whoever you might see.

Unknown · 16:03Jase: They'll have to come see Tony at Innovate.

Unknown · 16:04Nick: See Tony or anyone at Innovate. Tony's pretty busy these days, so probably someone else.

Unknown · 16:08Jase: Well, it's Dad's financial planner, but you know, everyone can get their own.

Unknown · 16:12Nick: But also very easy to work those things out. It's not difficult. It's a very easy process to go through and understand what that would look like.

Unknown · 16:19Jase: Yeah, it's working through those steps and having a bit of a game plan of what do the next couple of years look like and, you know, modelling it out. And then the what-ifs, like what if something doesn't go to plan? Like not having enough equity to release.

Unknown · 16:30Nick: Exactly right. Is that going to impact you? Second thing, whether you're lending to a child or a child and a partner, whatever it might be, you should have something in place from an agreement point of view. Loan agreement, gifting agreement, I don't know what you would call it, whatever you wanted to call it, but just covering what would go wrong.

Unknown · 16:50Sorry, what would happen when and if things went wrong because They easily can, particularly with relationship breakdowns. Now, you might have a sensational relationship with your child and that's fine, and you know your child's going to look after you. But if they break up, one of the things that will happen is they'll divide the assets.

Unknown · 17:09Now, if you've got a loan agreement in place, what comes off that asset base is the money that's owed to Mum and Dad. If you've got no agreement in place, it could be it can be sold as a gift. How would they know it was ever actually a loan? So you need to protect yourself, not so much from your own child, but from an exiting son-in-law or daughter-in-law who says, "No, you gifted that money to me." And the parents say, "No, well, I loaned it." So no, it was a gift.

Unknown · 17:36So highly important.

Unknown · 17:38Jase: We've got one live in action at the moment, which was a very similar circumstance. Excellent.

Unknown · 17:42Nick: No, not excellent, but great you've got an example.

Unknown · 17:44Jase: Well, yeah, and it was that. It was, you know, mum put in $100,000 towards the house for her son. And wife. They're now getting a divorce. And then it was the question of, was that a gift from mum or was that a loan? And then the conversation was back and forth, lawyers involved.

Unknown · 18:01You know, at the end of the day, it was agreed in the size of the settlement. It was said that, you know, it was a loan from mum. That loan is still a liability on his books. So that was factored into the thing. But again, nothing was documented. There was a lot of he said, she said. So this is why it's so important if it's just documented from day one.

Unknown · 18:18You know, everyone's on the same page and understands.

Unknown · 18:22Nick: And the cost to get to that, to get that answer versus probably minimal cost to draw up a really basic loan agreement.

Unknown · 18:29Jase: Thousands in legal fees versus a couple hundred bucks probably would more than cover it.

Unknown · 18:33Nick: I also think that you need to remember that you are playing the role of a lender. So if you're lending to your children, you should understand 100% their financial position. Now, I would argue that 99% of parents would not have any understanding of their children's financial position, how much they earn, inflows, outflows, any other debts they've got.

Unknown · 18:59Now, if you are lending to them, like any lender would, you make inquiries on their ability to get that money back to you, particularly if you need that money for retirement. So Jason's my son. Well, how much is he earning? How many other debts does he have?

Unknown · 19:15Does he have a car loan? Does he have credit cards? What kind of job's he got? Is it stable? What if he loses his job? So they're probably thinking about these things. Yeah. Like they're probably thinking, geez, Jay said he'd get it back to me. I'm pretty confident he will. I don't think he's got much debt. He seems to save a bit.

Unknown · 19:31But why wouldn't you make inquiries?

Unknown · 19:35Jase: Yeah.

Unknown · 19:35Nick: Proper inquiries to understand what impact that's going to have on you if Jase loses his job. If, you know, if Jase has got $100,000 in credit cards, he's got bad spending habits, well, I'm probably not gonna give him money as a parent to go and get into a house.

Unknown · 19:51I'm probably gonna say, you need to sort the credit cards out first and then come to me about help to get into a house. So, you know, don't feel that you can't ask these questions because any lender would and you're playing the role of a lender.

Unknown · 20:04Jase: Yeah, I think that that's the fantastic mindset to go with. The bank of mum and dad as the fifth biggest lender, fifth largest lender in Australia, needs to put in some boundaries and some rules and act like a lender would, you know, to shore it up and protect themselves. And I think going in with that mindset makes a lot of sense.

Unknown · 20:21Nick: For sure. And then going further on that is how is that money coming back? And that's the same question a lender's gonna ask. You've got a 30-year loan term. They determine if you've got the ability to repay it and then they see that they're gonna get their money back over 30 years.

Unknown · 20:36Jase: Which they enjoy 'cause there's a lot of interest in that 30 years.

Unknown · 20:38Nick: There is a lot of interest. The good thing is mum and dad aren't interested in the interest. They want the money back quick because they want to retire. So understanding, okay, Jase, based on your minimum repayment, how much extra do you think you can pay off? Do you have cash aside to do the renos you were talking about?

Unknown · 20:55So if we come to you in 3 years' time, we need this money back, you're saying you're going to accelerate your repayments and pay an extra $50,000 back over the next 3 years? And you'll be in a position to pay us back. But do you have the ability to do that?

Unknown · 21:11So at least if you build the plan out, then you can check in with that plan. If that plan was to do renos, is Jayce doing the renos or has he gone on another holiday? But you need to understand how it's gonna come back because then at least you can have a conversation around, hey, we spoke about this and you're not executing on anything that we discussed.

Unknown · 21:29You said you would make extra payments, but you've just gone and bought a new Tesla, you know, and paid cash.

Unknown · 21:36Jase: Not bad at least.

Unknown · 21:37Nick: But yes. Do you see what I mean?

Unknown · 21:39Jase: No, no, you're correct.

Unknown · 21:41Nick: That's the same as assessing whether or not they should be in a position to buy a house.

Unknown · 21:45Jase: And I think there are all those conversations that have to be had upfront again before it gets complicated or weird or gnarky. Just document it down. This is the intention and the plan. If anything varies, X, Y, Z happens and this is how we move on and get through it.

Unknown · 21:58Nick: And the last one I've got here, which is, you know, depending on people's circumstances will depend if this is an issue or not, but If you have a loan agreement in place or if you're gifting, these things can impact your pension as a retiree. So the one asset that is not assessed in determining whether or not or how much pension you get or whether or not you should get it is your owner-occupied home.

Unknown · 22:20So if you're drawing up loan agreements or if you're gifting, like there's certain amounts you can gift, they're pretty minimal and generally a house deposit will go over those. That can have an impact on your pension. So I don't want to go into what impact that would have.

Unknown · 22:38Yeah. Just understand that it can have an impact and determine what that impact will be, if any, before you make a decision.

Unknown · 22:47Jase: Well, again, something that we've seen at our end, you know, as people's accountants, you know, whether it's loans from the balance sheet of companies that have then gone on to help children as well, Centrelink and Services Australia, all these assessments that come into play can have a dramatic impact on pensions.

Unknown · 23:03And we've seen it ourselves where where people didn't look into it at the start. They've gone and created these schemes or not schemes, but these loans and different scenarios, not realising the impact it was going to have on mum and dad's pension. So their ability to actually live and get their weekly allowance or weekly payments, you know, gets impacted pretty hard.

Unknown · 23:22So all the more reason to go into this with the mindset of if you were the fifth largest lender and you were following the rules like the big banks, what would you be assessing, what would you be documenting, and what extra homework and research would you be doing to have yourself covered?

Unknown · 23:37Nick: For sure. And look, at the same time, I'm sure there's a lot of parents or grandparents out there who don't need the money to retire. They might have an investment property that they put up as an asset rather than the owner occupied, and they didn't have intentions of selling it in the next, you know, few years, 5 years, whatever it might be.

Unknown · 23:56But what I can tell you is that that's not most people, based on what we see in this business. Most people, it's the owner-occupied home and it's a guarantee against that home. And for most people, it's a 20% guarantee. We see that a lot. So if you've got $100,000 grand, a million-dollar property, 20% of that's $200,000 grand.

Unknown · 24:14So we're not talking small amounts here. So it's a long time to gain that kind of equity in a property, particularly if you've just gone into it. So, you know, these are things that need to be discussed and at least people can then make educated decisions as to whether or not it's right for them.

Unknown · 24:33Getting things like reverse mortgages, for those that don't know, I actually think reverse mortgages are great. To explain that really briefly, a common scenario you have is an elderly couple that don't have an income. They weren't big beneficiaries of the super scheme because they weren't baby boomers.

Unknown · 24:54They're that age group that's older. So they didn't have big super balances. But what they do have, they have properties that they bought a long time ago for next to nothing that are worth a lot of money. So they're sitting on these big assets. So they're asset rich, cash poor. And the scenario you hear is the little old lady's in a $3 million house but can't afford to turn the heating on.

Unknown · 25:14Right. So reverse mortgages are great for that because what it allows you to do is take, is raise a mortgage against the property, take an allowance weekly, fortnightly, whatever it might be, and then you don't have a repayment on that. They take that money back when you pass away and sell the property.

Unknown · 25:32Brilliant. Because it might be a $3 million property that you might draw $200,000 out over the next 10 years. Who cares? Who cares? Because it's probably going up by that anyway. And if it means that that, you know, older lady got to stay warm and enjoy the last 10 years of her life, then happy day.

Unknown · 25:48It's got to go on a holiday. So I think reverse mortgages are great for that.

Unknown · 25:53Jase: When executed properly, yeah.

Unknown · 25:54Nick: When executed properly. But then using that to leverage kids into property, I think that is dangerous. Again, depending on the equity and what's there. So just a lot to consider. The other thing, the last thing I'll say on this is we've been in such a good property market prior to the last few years for a long, long time.

Unknown · 26:13So everyone just assumes that property's gonna keep going up and everything will be good. My property goes up, my kids' property goes up and it's all gonna be good. But what happens when it doesn't? Like Melbourne hasn't for the last 2 to 3 years. So if you went into this 2 to 3 years ago when the market was pumping, thinking your kids were gonna get you that money back in 2 to 3 years, we're now sitting at 2026 market's gone nowhere, if anything, slightly backwards depending on the suburb.

Unknown · 26:36You can't get access to your money. You might not be able to retire. So it's understanding what could go wrong, making an educated decision.

Unknown · 26:44Jase: With all that said, Nick, and there's a lot going on in the world and you've just touched on property prices in Melbourne haven't necessarily gone up. Is this something, you know, you're a dad now, projecting forward a few years into the future, is this something you're going to have to do or you think you'll be doing?

Unknown · 26:58Nick: I think my response to that and any parent's response would be 100% yes, if it makes sense. Because the reality is the longer you leave it, the harder it's going to get. So the sooner that your children can get in, the better.

Unknown · 27:15The other thing is you're already into the market in most cases, so you're creating equity year on year. It's going to go to your children anyway. So it goes back to my point at the start. I think you could almost let the wealth transfer happen by itself without trying to tax the baby boomers or whatever the government tries to do to get money.

Unknown · 27:36Just let them deal with it themselves. So if I've got a $3 million house, I'm picking a number here, and my child wants to lend $200 grand against that to get into a property, why wouldn't I do that if it wasn't gonna impact my ability to retire?

Unknown · 27:50Jase: Yeah.

Unknown · 27:50Nick: Because that's just $200,000 less than she would've got it. Inheritance anyway. That's the way I look at it. And I think that's the way most parents would look at it and definitely do look at it because $35 billion a year. So people are clearly going, I'm going to do it.

Unknown · 28:05Jase: Yeah.

Unknown · 28:06Nick: So the answer is yes. And I don't think any parent would say no. And look, at the same time, people are going into debt to do it. So clearly people are, as parents do, putting their children first. But again, flipping that is asking the question that as a child and an adult child, if you knew what position your parents could be in if something went wrong, would you do it?

Unknown · 28:34And in most cases, the answer would be no. So, because they won't want to impact their parents' plans in most cases. So yeah, I would definitely do it. 99% of parents would. I would just, you know, encourage both sides to get educated because I think a lot of the time, you know, in a lot of circumstances— sorry, if the child knew that the parents wouldn't be doing it, they wouldn't take it.

Unknown · 29:00Jase: Great point, Nick, and thank you for bringing this episode to the table. It's been a really interesting discussion. If you're listening to The Numbers Game, we appreciate your support. Please give us a follow or subscribe on YouTube, follow us on Spotify, and share an episode to a mate who may not have listened to us before. We'd love the support.

Unknown · 29:16If this has resonated with you, if mum and dad have helped you, drop a comment too and let us know how it worked out. And if there has been any problems, we'd love to hear your stories. Until next time, just remember, the most generous lender often has the least protection. Game over. This podcast is for educational and informational purposes only.

Unknown · 29:34The conversations are of a general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional. Individuals on the podcast may hold positions in the companies discussed. ---