Cash & kin

Parents are increasingly dipping into their own savings to help their adult children with daily living costs. But that is only entrenching the wealth gap.

- SARAH CATHERALL

It wasn’t part of their plan a few years out from retirement, but a few months ago, Angela and Alexander O’Donnell walked into their bank and remort-gaged their family home. They felt they had no choice — their 39-year-old daughter, Natalie, was facing the prospect of losing her home in Kaiapoi and having to move her two children into a rental after her marriage broke up.

Natalie wanted to buy her ex out, but she couldn’t get a mortgage. So her parents mortgaged their own home instead, lending her the money they borrowed from the bank. “How could I enjoy my life when my daughter was struggling? I just couldn’t do that,’’ Angela says.

Angela, 60, and Alexander, 65, are part of an invisible yet incredibly popular institution known as “the Bank of Mum and Dad’’. As their off spring struggle to manage their daily living costs, more and more Kiwi parents are stepping in to help: paying bills, providing allowances, stumping up deposits, and in some cases, providing entire houses.

A recent Consumer NZ survey estimated that “the Bank of Mum and Dad’’ has doled out $22.6 billion in home loans in recent years, which, if true, would make it the fifth-largest financial lender in this country — more than TSB and Kiwibank combined.

The survey, which had a margin of error of almost 5%, suggested one in seven of all children who bought a house had support from their parents. The average contribution was $108,000.

In Auckland, 58% of parents who took part in the survey helped their children to buy a property, and the amounts they gave were $20,000 more than the national average. For one in 10 parents, their contribution put them under moderate to serious financial strain.