Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 274

Don’t allow a BoMaD to ruin your retirement

This article is the third in a series written for Cuffelinks by leading retirement website YourLifeChoices. It reports on the financial impact on parents who are assisting adult children with loans to buy property or are allowing them to live rent-free at home.

What is a BoMaD and why should you care?

The BoMaD – or Bank of Mum and Dad – is the fifth largest lending institution in Australia, ahead of ING, Suncorp and Bendigo Bank. It is estimated to be lending $65 billion per annum, according to a Mozo survey in September 2017. That’s right, $65 billion a year is being transferred from the pockets of Australian mums and dads to their adult children to assist them in buying a house.

Children staying at home is more difficult to measure

While children are no doubt lovable, they can also be very expensive, particularly when it comes to reducing your retirement income. It’s not just in the headline fact of parents lending grown-up children money to buy property. There is a quieter, more insidious erosion of retirement savings and income, and that occurs when adult children live at home for extended periods without contributing to household expenses. This is a less spectacular, difficult-to-measure version of the BoMaD. And it’s not a loan, but a gift!

YourLifeChoices runs frequent in-depth surveys on all things to do with retirement. In the recent 2018 Retirement Matters survey, we asked our 230,000 55–75-year-old members whether assisting younger family members was eroding their retirement savings.

Here is what we learnt:

  • 17% of respondents still have adult children living at home
  • Of these, only 58% are receiving contributions to the household expenses
  • Of those respondents with adult children at home, 32% believe their retirement income is reduced by this arrangement
  • The median amount respondents projected they were losing per annum was $10,000, within a range of $5000 to $50,000.

So, what does this mean for you and your retirement? This is tricky emotional territory.

As reported above, most parents are relaxed about long-term cohabitation with their adult kids. The extended family is a traditional source of strength, support, love and fun. There’s a lot to like about this way of living, and it really is the very basis of community.

But financially, it can be an extremely lopsided arrangement. The great ‘risk shift’ of retirement income, as identified by American academic Jacob Hacker in 2006, suggests that we are all basically on our own when it comes to creating a retirement nest egg and managing it successfully.

Consider the money foregone

What is often overlooked is money foregone, and this is where a BoMaD can kill your future prospects. Retirement is fast becoming a user-pays system, exacerbated by the increasing need for personal income to cover both health and aged care.

So, what can you do if you love having your adult children living at home, but fear this is having a negative impact on your finances?

You could start by recognising that family comes first, and if you are happy to have them at home, then that is where they belong. But make sure everyone is paying their way.

Think back to your early days of share houses and flatmates. There are mutual costs which include:

  • mortgage repayments
  • energy bills
  • communication: internet, movie streaming, subscriptions, etc
  • maintenance
  • cleaning
  • gardening
  • insurances
  • food and groceries.

When you stop and itemise the expenses, you realise that it costs a lot to run a home, even one which is fully owned. So create a spreadsheet with all household expenses listed, total it and divide it equally by all adults aged 21 and over. Set up a new bank account to be managed by the home owner, or whoever’s name is on the lease if you are renting.

Request all ‘guests’ organise an automatic payment from their own bank account into the household expenses account, equalling their share of these expenses, on the first of the month, every month.

When sufficient money is collected, organise for automatic payments of all household bills on their due date, and a payment covering ‘general monies’ (i.e., money for consumables, such as food and other supermarket items) to be made monthly into the homeowner’s account to cover these extra, often unnoticed, expenses.

This will hopefully remove potential arguments and ensure that a fair share of the expenses is paid by all, as painlessly as possible.

It may sound like an overly formal system, but rent-free kids eating you out of house and home is hardly the answer, either. Yes, you love them dearly, but you also have to plan for your next 20 or 30 years of paying bills, perhaps when your health is far less robust than theirs.

YourLifeChoices’ June Retirement Affordability IndexTM reports that it costs a couple on a full or part age pension, living in their own home, about $42,830 per annum to cover all expenses. If these costs are higher because you are accommodating your grown-up kids, it’s up to you to ensure you are not digging into your savings to support them forever.

At the very least, it is worth thinking about.

 

Kaye Fallick is publisher of YourLifeChoices, Australia’s leading retirement website for over-55s. It delivers independent information and resources to 250,000 members across Australia.

 

RELATED ARTICLES

Retirement and Antarctica: start early in setting your goals

What I know now about retirement income

Australians’ unrealistic retirement expectations

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Latest Updates

Investment strategies

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.