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🇦🇺 Australia /Economy & Trade

Why trust is not enough when lending money to family

From ABC Australia · () English

Translated from English and summarized by DistantNews. Read the original for the full story.

At a glance

In-depth Named sources Context piece
  • With home ownership increasingly out of reach for young Australians, many families are lending money for property purchases and everyday expenses.
  • Research by University of Newcastle sociologist Julia Cook found that families often leave loan terms unclear, creating legal and relationship risks.
  • Family support can range from modest sums to hundreds of thousands of dollars, while money taboos make it difficult to discuss whether funds are gifts or loans.

For many young Australians, the bank of mum and dad has become a financial lifeline as owning a home moves further out of reach. Families also lend money for everyday expenses during the cost-of-living crisis.

The informal bank is estimated to be worth about $35 billion. The Productivity Commission says that, if it were a real bank, it would rank somewhere between Australia’s fifth- and ninth-largest mortgage lender.

One father was living in social housing and was a full-time carer for his wife. He had saved money for years to give to his daughter.

· Julia CookCook described parents with limited means who still contributed to their children’s home purchases.

Youth sociologist and University of Newcastle senior lecturer Julia Cook and her team interviewed 80 older parents and adult children, mostly from Gadigal Country and Sydney, who had given or received family money for a home. Participants exchanged an average of $75,000. Amounts ranged from $5,000 to $500,000.

There was rarely an explicit conversation.

· Julia CookShe explained why families often had different understandings of whether money was a loan or a gift.

Cook said the group was mainly middle and upper class, but some parents with limited means were giving everything they could. One father lived in social housing and cared full-time for his wife while saving for years to help his daughter. Another woman, aged 70, did not own property, lived rent-free in a friend’s house and still worked part-time as a teacher while contributing to her son’s mortgage.

The central problem was often not the amount of money, but the absence of a clear agreement. Parents and children frequently disagreed about whether the money was a loan or a gift, and most had not put the arrangement in writing. Cook said an arrangement might begin as a loan, then become a gift after the child had children or faced financial difficulty. “There was rarely an explicit conversation,” she said.

With money, there can be the fear of triggering shame.

· Elizabeth ShawThe Relationships NSW chief executive described why families may avoid discussing loan terms.

Elizabeth Shaw, chief executive of Relationships NSW, said discussions about money can trigger shame. Parents may avoid making a child feel bad about needing help, leaving behind “unspoken ties that can come back to bite people.”

It can result in a loan that comes with all sorts of unspoken ties that can come back to bite people.

· Elizabeth ShawShaw warned about the relationship risks of informal family lending.
About this summary

Originally published by ABC Australia in English. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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