How to share the family wealth

A friend of mine refers to it as, “The greatest scratch lottery ticket win of all time, owning your family home in the right place.” And for many local residents who’ve called the Northern Beaches home since well before the property boom set off, when it was indeed a modest place to live, they’ve likely seen their wealth rise in a way they could
not have imagined. 

Combine the unprecedented rise in value of the family’s Northern Beaches home with a dedicated life of hard work and modest spending, some generous superannuation outcomes, strong equity markets and the end result is there are now a lot of local parents of grown up children finding themselves far wealthier in 2021 than they could have ever conceived possible 30, 40 or 50 years ago.

While this is a fantastic scenario to find oneself in, the challenge faced now is working out the best possible way to help their kids (and grandkids). Where this gets complicated is when the kids start wondering the same thing. What next? The best things in life are free of course but there’s rarely a dollar that can’t help make life just that little bit easier, and that’s especially the case for young families struggling to keep up with the costs of living, let alone get a foot on the property ladder.

Before parents start handing money over to their children, they need firstly to be sure their own futures are secure. They also have the right to ensure any financial assistance they provide is effective and working towards achieving desired outcomes. 

A further issue that can be very tricky to address is keeping their help fair when they have a number of children with different financial needs and at different life stages.

In terms of security, parents should have an understanding of what they can expect to be spending over the course of their lives, what amount is a comfortable reserve to have (we all want to sleep soundly), how much they should provide for aged care costs (which have gone up in line with property prices). Then there are issues of government means testing for the pension and other entitlements, and the prospect of money given to children being part of a messy divorce fight. Meanwhile, parents may want to see money used in a certain way – and this is where help to buy the family home is good, as is help with school fees. 

I often have this type of conversation with my clients. And I’m afraid there is no one-size-fits all answer. But talking it through and thinking carefully about it will certainly make for the best outcomes. 

On a side note, my 15year old daughter started a job recently, and with that received a tax file number and set up a superannuation fund account. In 2021, I can be confident her investments are run at low cost, her super fund will follow her between employees, and she can move her money easily between superannuation providers.