Money
Bank of Mum and Dad: a modern inheritance rethink
Why more Australians are giving their kids and grandkids an early inheritance and what to think about before you join them.
By Bron Maxabella
Most of us grew up with the idea that inheritances happen after we’re gone. But increasingly, parents are asking a new question: why wait? If the goal is to help our children live better, happier lives, perhaps it makes more sense to share our wealth while we’re still around to see the difference it makes.
It’s a trend that’s reshaping the landscape of intergenerational wealth and thanks to rising home values and new ways to safely access that wealth, the Bank of Mum and Dad (BOMAD) has never been busier.
The power of giving early
It’s no secret that today’s housing market is a hard nut to crack. Many younger Australians are priced out of home ownership, even with solid incomes and good saving habits. The ANZ CoreLogic Housing Affordability Report estimated that it would take 10.6 years to save for a 20% deposit for the median value home. That’s an entire decade of rent increases, lost compounding growth and zero smashed avo on toast.
Enter the BOMAD; in particular, the home equity the BOMAD has behind it.
A lump sum of, say, $100,000 gifted at age 30 can be life-changing. It can cover a decent deposit on a modest home, opening the door to property ownership much earlier than would otherwise be possible. And it’s not just about paying less interest or owning a home sooner, it’s about what that early start does over time.
Let’s say that property grows at a conservative 4% a year over 35 years. That $100,000 gift today could underpin a home worth more than $560,000 in growth by the time your child is your age. In other words, your early help doesn’t just buy a home; it builds a lifetime of equity.
Compare that to leaving a $100,000 inheritance later in life. It’s still generous, of course, but at that stage, a lump sum might help with comfort and opportunity, but it won’t shape their financial trajectory in the same way an early boost would.
The simple maths tells a compelling story: the earlier the financial support, the greater the potential lifetime impact.
Sharing the joy, not just the wealth
Beyond the financial benefits, there’s a deeply human appeal to giving while you’re still here to see the results.
You get to watch your children settle into their first home. You can celebrate milestones like the move-in day, the garden you helped plant, the sense of stability you helped create. This is where a cash gift becomes about so much more than just the money.
Many parents also find it emotionally rewarding to know their wealth is doing real good right now, instead of sitting on paper waiting for “one day”. It’s a way of saying, I’ve worked hard for this and I want it to work hard for you too.
How people are making it work
Traditionally, early gifting came from savings or selling assets, but that’s changing. Homeowners over 65 are increasingly using part of their home equity to fund early inheritances without selling up or compromising their own lifestyle.
Products like Citro partner Household Capital’s Household Loan [HC to supply trackable link] allow you to responsibly draw on the value of your home while still staying comfortably living in it.
For example, a retired couple with a paid-off home valued at $1.2 million might access $200,000 of their equity to help their two adult children with house deposits. They remain in their home, and their super plus pension continues to cover daily living expenses.
Information you should consider about home equity release and reverse mortgages is provided on the government’s Moneysmart website.
The fine print: risks and realities
Of course, generosity needs to be balanced with caution. There are a few key considerations before opening the vault and you should only proceed with a clear understanding of your long-term financial outlook.
1. Longevity risk
You might live longer than you expect (good news, but still). Accessing equity for an early inheritance reduces the buffer available for future care needs, health expenses or lifestyle changes.
2. Aged care costs
Future government reforms and aged care costs can be unpredictable. If you ever need residential care, you may need access to lump sums for bonds or ongoing fees.
3. Interest growth
If you fund your early inheritance through a reverse mortgage or equity release, interest compounds over time. That means the amount owed will grow, reducing the value of the estate left later.
4. Tax implications
Generally, financial gifts to family aren’t taxed in Australia, but there can still be flow-on effects. Large transfers can influence Centrelink Age Pension eligibility under the gifting rules (you can only give up to $10,000 per year or $30,000 over five years without penalty). Your gift may also affect your children's eligibility for means-tested government benefits, which are based on an asset and income assessment. So it's important to check with Services Australia and wise for everyone involved to seek professional tax and financial advice before moving money around.
Smart management strategies
There are some practical ways to make an early inheritance work well for everyone involved.
1. Set clear agreements
Even though it’s family, it pays to put things in writing. Document whether the gift is unconditional or if you expect repayment under certain conditions. This helps prevent awkwardness (and arguments) later. Also consider what’s ‘fair’ to all your children (because, trust us, it will be top of mind for them!). Always seek professional legal advice when setting up agreements.
2. Consider shared responsibility
If they access home equity to give an early inheritance, some families choose to have adult children pay the interest on the reverse mortgage. This keeps the loan balance stable over time and means the overall cost of borrowing remains modest. The estate value doesn't erode over time either if the interest is paid. Maybe this is an option for you too?
3. Use the right structure
Different products have different rules, rates and protections. Reputable providers like Household Capital focus on responsible lending and transparency, which are important safeguards for any retiree using home equity.
4. Get some advice
Professional advice is essential. A trusted source, such as your financial adviser, accountant or aged-care adviser, should be able to model what your finances (and those of your kids’) could look like across different scenarios.
The changing meaning of inheritance
Once, inheritance was all about legacy. Today, it’s increasingly about impact.
Parents want their wealth to create opportunities, not just comfort. They want to make life a little less pressured for their kids and grandkids and often they want to enjoy that process themselves.
One way or another, the Bank of Mum and Dad might not charge interest, but it’s certainly generating a lot of it.
This article contains general information only. It is not financial or legal advice and is not intended to influence readers’ decisions about any financial products or investments. Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their financial circumstances, objectives and needs. Citro may receive a referral fee for products or services obtained through Household Capital.
Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable, and terms and conditions apply (available upon request). Household Capital Pty Limited ACN 618 068 214, Australian Credit Licence 545906, is the Servicer for the credit provider Household Capital Services Pty Limited ACN 625 860 764.
Feature image: iStock/Jacob Wackerhausen
Tell us in the comments below: How would your BOMAD help the kids if you could?
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