Hi Tammy,
With the recent interest rate rises and inflation, my adult children are struggling to pay their mortgage. I want to help them out financially, but I’m close to retirement and not sure if it is a good idea. What do you think?
Thanks, John. Mona Vale.
Hi John,
This is so common! Just because our kids have grown and left home, doesn’t mean we stop worrying! It is natural to want to help your children. However, when mixing money and family, it is important to tread carefully.
Can you afford to help your child without impacting your own financial security? This is where talking to a financial planner can help. They will review whether you are on track for retirement and how helping your kids could impact this. As the flight attendant says, “Put your own mask on first!”
If you can afford to help, arguably the most important consideration is – should you? I have heard many heartbreaking stories of how badly it can end. Money can cause resentment and break up even the closest families.
I would firstly offer your time and support. Have they reviewed their budget and spending? Have they talked to their lender and service providers about a payment plan? Have they explored ways to maximise their income? Can they access Centrelink or super under financial hardship provisions? Help them to help themselves.
If you still want to provide financial support, be very clear about the terms of that support BEFORE you give them any money. Is it a gift or a loan? When must it be repaid? Is interest being charged? If they can’t repay, what action is expected (will they downsize to a more affordable property)? Seek legal advice and document everything in writing. Importantly, discuss the arrangement openly with all your children.
Quick tips: Charging a market rate of interest can keep arrangements
fair between children. A written loan agreement may provide asset protection should your child’s relationship break down. You must update your will – you can forgive or equalise gifts and loans via your estate. If you use money from super, you might not be able to recontribute it. This can have long lasting tax implications. Seek advice before you act, afterwards it may be too late.
Any questions, please call me on 8376 0350.
Regards, Tammy
Financial planner Tammy Marshman of Up Wealth Management is an Authorised Representative of Consultum Financial Advisers Pty Ltd, AFSL 230323. Phone 8376 0350 or visit upwealthmanagement.com.au
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