In the face of tumbling global markets, RaboDirect’s most recent National Savings and Debt Barometer highlights new concerns that are likely to hit many Australians where they live ”“ literally.
Despite the hard reality of dwindling superannuation balances and an uncertain market outlook, the survey has found that 1 in 5 Baby Boomer parents are still expecting to provide assistance to their children to help purchase their first home. At the same time, 35% of Gen Ys surveyed said that they will need help from their parents to purchase a home.
These findings lead to some real concerns about whether Baby Boomers, already under stress due to dwindling superannuation balances, will be able to afford to dip into their retirement funds to help their children buy their first home.
What to consider
No matter what generation you are, think twice before jumping head first into any kind of debt, Â especially one as significant as a mortgage, no matter how noble your intentions.
The truth is that making too large a commitment in an unstable economic environment may simply drive each generation further into debt.
Instead, to avoid financial stress and concern, parents and their children need to talk about their finances, discussing options and expectations fully and frankly.
The bottom line is, if you can’t afford the mortgage, whether you are the parent digging deep into your pocket or the child with your hand out for help, consider your options very carefully and be realistic about your finances.
What are my options?
Take advantage of the best interest rates available to maximise the benefits of compounding, and you’ll see your money grow faster. That way, you may reduce or eliminate the need to borrow from cash-strapped parents.
Rather than leaving money idle in a low- or no-interest transaction account ”“ and often paying high fees for the privilege ”“ make sure you choose a high interest savings account that offers you plenty of flexibility, so you don’t have to meet excessively strict conditions to earn the high rate.
Or choose a term deposit if you already have a decent sum salted away. Shop around for high rates and make sure you understand the conditions. You will receive a guaranteed return with the added advantage of having your hard-earned savings safely locked away.