How can you help your children financially?

Helping your children financially is something many parents aspire to, especially when it comes to big milestones like buying a first home or starting a family. But knowing how to provide support in a way that’s both meaningful and sustainable can be challenging. From government incentives and loan structures to super contributions and estate planning, there are a range of strategies that could make a difference, without putting your own financial future at risk.

In this article, we explore practical ways to support your children while maintaining your own financial wellbeing.

First Homebuyer Opportunities

Supporting your children in buying their first home can be a powerful way to help them establish long-term financial security. In states such as Queensland, Victoria, and New South Wales, eligible first home buyers may benefit from a range of government incentives, including stamp duty exemptions and cash grants. For example, for those buying or building a new home in Queensland, who signed contracts between 20 November 2023 and 30 June 2026 (both dates inclusive), can receive a grant of $30,000. While those who signed contracts before 20 November 2023, may be eligible to receive a $15,000 grant. ¹

The First Home Guarantee scheme enables buyers to enter the market with a 5% deposit, avoiding Lenders Mortgage Insurance (LMI) through a government-backed guarantee of up to 15% of the property’s value. Eligibility criteria apply, including income limits, property value caps, and owner-occupier requirements.

The First Home Super Saver Scheme (FHSS) allows eligible first home buyers to save for a home deposit by making voluntary contributions to their superannuation fund. These contributions can be before-tax (concessional) or after-tax (non-concessional), and benefit from favourable tax treatment, such as a 15% tax rate on concessional contributions and a 30% FHSS tax offset. This scheme allows for maximum contributions of $15,000 in any one financial year, with a maximum of $50,000 across all years. ²

Parents can also assist through the Family Security Guarantee, using equity in their own home to secure part of their child’s loan. This can eliminate LMI and increase borrowing capacity. However, it’s essential to understand the risks, such as potential liability and impacts on your own borrowing power.

If your children require assistance with purchasing their new home, our lending specialists at Alteris Lending can work with them to understand their specific needs and find the perfect loan solution.

Gifting and Loans

Another way of helping your children financially is to provide a lump sum to transfer wealth early and witness its positive impact. Common uses include home deposits, education expenses, or rental support. When the amount is significant, formal documentation is important to avoid misunderstandings, especially in the context of relationships or Centrelink entitlements. Note that gifts exceeding $10,000 per annum may affect eligibility for certain government benefits.

Alternatively, structuring support as a private loan with a formal agreement offers clarity and legal protection. It outlines repayment terms and reinforces the seriousness of the arrangement. Courts typically recognise documented loans as liabilities, which can be crucial in safeguarding your contribution during disputes or relationship breakdowns.

For example, our advisers recently worked with a couple in their early 50s who wanted to help each of their two adult sons with $100,000 to purchase their first homes. Before speaking with their children, they sought guidance on affordability, fairness, and whether to treat the support as a gift or loan. After consultation, they chose to formalise the arrangement as a loan, providing both financial support for their children and protection against future risks.

Contribute to their Super and Insurance

One of the most effective ways to assist your children, without compromising your future, is through strategic superannuation contributions. Even modest contributions to your child’s super can compound significantly over time, helping them build a more secure retirement and reinforcing the importance of long-term financial planning. Before offering support, it’s wise to revisit your own retirement strategy. If you have unused concessional caps, catch-up contributions may provide a tax-effective opportunity to strengthen your super. Likewise, if you’re considering downsizing your home, the downsizer contribution allows you to direct up to $300,000 into super, potentially unlocking liquidity to assist your children while enhancing your own retirement position.

Personal Insurance is another area where your support can have a lasting impact. Encouraging, and where appropriate, assisting, your children to secure adequate life and income protection insurance is a practical way to safeguard their financial wellbeing. This is particularly important if they are taking on a mortgage or raising a family. In the event of the unexpected, grandparents are often called upon to step in. Ensuring your children have the right cover in place can protect not only their household but also your own financial and emotional stability. At the same time, it’s essential to ensure your own insurance arrangements remain current, especially if you’ve taken on the role of guarantor or lender.

Finally, estate planning should be a priority not only for you but also for your children. If you’re providing financial support or entering any formal arrangements, it’s important that both generations have up-to-date wills and powers of attorney in place. Encouraging your children to document their intentions ensures that their assets, responsibilities, and dependents are protected in the event of the unexpected. At the same time, reviewing your own estate plan to reflect any financial commitments or changes in family circumstances helps ensure your wishes are clearly articulated and legally safeguarded, reducing the potential for future disputes or uncertainty.

If you or your children need help finding the right insurance solution for your circumstances, please speak with your financial adviser or contact our team directly. We’ll connect you with our dedicated insurance brokers at Alteris Insurance, who can provide tailored advice to protect you and your children’s financial future.

Next Steps

Helping your children financially financially can be incredibly fulfilling, but it’s important to approach it with careful planning and foresight. Whether you’re assisting with a home deposit, providing a lump sum, or acting as a guarantor, the way your support is structured and timed can have lasting implications, for both your children’s financial future and your own.

We’ll be exploring each of these topics in more detail over the coming weeks. In the meantime, speak with your adviser today or reach out to our team to find out which of these opportunities could be right for your family, and how to make the most of them.

Sources

1. https://qro.qld.gov.au/property-concessions-grants/first-home-grant/eligibility/
2. https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme