Australians under 40 often grapple with housing affordability, ongoing mortgage repayments, family planning, and career progression.

However, these are also exciting times, marked by milestones such as buying your first home, having children and career advancements.

What’s often missing are the conversations with ageing parents on the planning of wealth distribution.

With around $3.5 trillion expected to be transferred from those aged 60+ over the next 20 years – almost the size of our current super system – AMP’s recent research (with under 40s Australians) has uncovered some interesting dynamics within families – including a lack of communication between the generations on wealth matters.

Not relying on the ‘Bank of mum and dad’

The findings also reflect a clear desire of under 40s to secure their own financial independence, not relying on the ‘bank of mum and dad’, despite concerns that increasing housing unaffordability will impact their own wealth in retirement.

• 4 in 5 under 40 haven’t asked their parents for any financial support
• 3 in 5 under 40 haven’t spoken to their parents about wealth transferral
• Only 1 in 5 are relying on financial assistance and inheritance from their parents for their future financial security

Despite these statistics, half of those under 40s that were surveyed, believe they will need to financially support their parents, as they age.

In the current economic environment, intergenerational wealth discussions within families need to become a priority, as those under 40 reflected a general lack of confidence in achieving financial security and independence, despite their desire to do so.

• 3 in 5 under 40 believe their generation has it harder financially than their parents did, increasing to 7 in 10 for those under 29
• 4 in 5 under 40 who currently don’t own a property believe it will be out of reach
• 4 in 5 under 40 believe that not owning a property will be detrimental to their long-term wealth and retirement

When you consider the above findings with the knowledge that many Australian retirees are fearful their savings won’t last – a fear which prevents spending and impacts their quality of life, potentially hindering open discussions with their children – it becomes even more important that effective communication and financial planning is implemented for the benefit of all generations.

How financial advice can help

Financial advice is important, not just for pre and post retirees, it can equally help the under 40s develop successful wealth creation and protection strategies by looking at a client’s whole situation including the intergenerational wealth challenges within their extended families and devising tailored solutions for their unique circumstances.

An adviser can help younger clients engage with their maturing parents and understand the implications of different decisions with regard to intergenerational wealth transfer, including options involving financially dependent loved ones.

Contact us to see how we can help develop a wealth creation strategy to suit your goals and plans.

Current as at August 2024