Help Them Fly The Full Nest
P2C News - Monthly update for families building wealth 13 October 2015

A recent report: ‘Meet the Full Nesters’, by the Centre for the Modern Family, funded by British insurer Scottish Widows, surveyed parent ‘full nesters’, that is households with adult children living at home, about their financial circumstances.

Many of the parents surveyed said that they were raiding their savings or putting off retirement plans to cover the costs of their adult children living under their roof. In a similar situation to Australia, almost a third of British full nesters said they were saving less to support their adult children, with more than a quarter saying they were dipping into their savings to meet everyday living costs.

Many of the parents are being, or will likely, be squeezed between ever-increasing longevity that has to be funded and the costs of having adult children at home for longer. At the very time when extra money should be going into superannuation, the living expenses of the adult children keep rolling in.

Most parents are more than happy to help out their children and money is not everything. But it is, nevertheless, having a big impact on parents' ability to save for their retirements.

There is a way for the full nesters to invest their money, thereby making a return, while at the same time helping their adult children stand on their own two feet and leave home. They can do this by protecting their retirement savings so that they are secure but also protecting intergenerational wealth.

La Trobe Financial offers a parent-to-child (P2CTM) loan service, where parties can set terms at the start of the loan, but the management of that loan is administered by the lender. A loan of this kind means there’s less danger of the family feuding over repayments because there’s greater protection for both parties around assets and savings, especially if the borrower runs into difficulties.

By using a mortgage product like this, administered by an independent party such as La Trobe Financial, it is a way to minimise the strain on relationships when offering your adult child financial assistance. Such mortgages also mean your home is not used as security, your credit rating is not at risk and your adult children may still qualify for grants and concessions. The flexibility of this loan even means both sets of parents can contribute to the loan rather than all the weight resting on one party.

Going down the traditional route of lending money to your adult child directly or providing a bank guarantee can mean, in the worst case scenario, you could end up losing your home or compromising access to your retirement funds. Signing on as a co-buyer might also seem like a good idea, but your adult child could miss out on the First Home Owner Grant or stamp duty concessions and investing in property may be less tax effective for you than leaving that money in superannuation.

Lending money to family brings in an element of emotion. Entering into a financial arrangement with your adult child can strain even the strongest relationship. If you provide an informal loan it’s you who carries all the risk.

The P2CTM mortgage product means that you can remove each of these factors, you are able to help your adult children, you are able to make an investment, and you can carry on enjoying your retirement years while safe in the knowledge that you have also done the right thing by the next generation.

Best regards,

Martin Barry
Vice President,
Chief Wealth Management Officer

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La Trobe Financial is one of Australia's leading independent credit specialist Fund Managers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Credit Funds under AFSL 222213. It employs over 150 staff and has managed over AUD$10 Billion covering over 100,000 investment grade assets since inception in 1952.

Copyright 2014 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.

La Trobe Financial Services Pty Limited - Australian Credit Licence Number: 392385
La Trobe Financial Asset Management Limited - Australian Credit Licence Number: 222213

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