In the face of dizzyingly high house prices and a cost-of-living crisis, young Australians are increasingly turning to their parents for financial support – but it might be time to get yourself a better back-up plan.

Whether you need help breaking into an increasingly hostile housing market, or just making ends meet, it’s not uncommon for young Australians – and not-so-young Australians – to rely on their parents for financial assistance.

The Productivity Commission found Australians aged 18-34 are in a weaker financial position than any living generation at a similar age, while another study found almost half of Australians aged between 20-22 are receiving financial support from their families – not just for housing, but for help with basic expenses.

And hey, we get it – that’s one of the perks of having supportive parents, right? But if you find yourself becoming too reliant on them, then it’s probably time to start cutting the cord.

What’s wrong with the Bank of Mum and Dad?

If you’re fortunate enough to receive financial support from your parents, then you probably count yourself lucky. You might even take it for granted. But it’s worth thinking about what that support is really costing them – and you.

Research shows it’s not just rich parents providing assistance to their adult children, but also parents of more modest means. By doing so, these parents could be putting their own financial future at risk.

Think of it this way: Every dollar your parents use to support you is one they could be using to support their own retirement. Even a couple of thousand dollars a year could make a significant difference to their nest egg and make it more likely that you’ll end up living with your parents again – but this time, they’ll be under your roof.

Consider, too, that if you have the type of parents who are willing to provide you with financial support, they might not be willing to tell you if they’re doing it tough themselves so you won’t know the pressure they’re under until it’s too late.

This can lead to tense and strained family relationships, not just with your parents, but with siblings who become resentful of the support your parents have provided you and the pressure you’ve inadvertently placed them under (This is particularly true if the terms of your ‘loan’ aren’t clear – a situation that could end up needing to be resolved in court if things go south).

And when it comes time to claim your inheritance, you could find yourself in a dispute with your brothers and sisters who didn’t receive support from your parents so they feel entitled to a greater share of the inheritance.

That’s all assuming that something goes wrong with your arrangement with your parents. But, here’s the thing – even if your parents are only loaning you what they can safely afford; even if you fully intend on paying it back on time with interest; and even if you have a rock-solid relationship with your family that no dispute over money could ever threaten; you could still be hurting yourself by relying too much on the Bank of Mum and Dad.

When you try to rent an apartment, take out a loan for a car, or buy a house, you’ll almost definitely need to show a lender your credit score. Your credit score is determined by your credit history and, unless your mum and dad are literally running a bank, the money you’ve borrowed from them won’t be included in that history. So, the sooner you can start building up a credit history of your own, the better. It’s important to remember that getting a loan from a bank involves interest rates, repayment terms, and has consequences if you miss a payment, so be sure to consider whether this option meets your needs.

Even if your parents loan you a substantial amount of money for a house deposit, most lenders will still want to see your bank statements for evidence of your ability to save money. If it’s clear you didn’t save for your deposit itself; they won’t be convinced of your discipline or ability to make repayments.

Most importantly, learning how to become self-reliant and independent is really what ‘adulting’ is all about. If you rely on your parents too long when you’re perfectly capable of making it on your own, you might be stunting your own personal growth. Instead, it’s time to go out into the world and conquer it on your own, like the boss you are.

So, it’s time to stop counting on the Bank of Mum and Dad, and it’s definitely time to stop waiting on that inheritance. Here are some simple tips to help you rely less on your parents and start standing on your own.

How to become financially idependent

Let’s start at the beginning – no more calls to mum and dad when you need help paying the rent, or filling the car with fuel, or putting food in the fridge, or buying one little house.

Easier said than done, right? Taking responsibility for your own finances is a big step – but developing these healthy financial habits will help.

If you have any concerns about your financial situation, a free chat with a financial counsellor may provide you with guidance as you work to reach your goals.

Managing your money

No matter how much money you have, creating a realistic budget is one of the best things you can do to support yourself. A budget can help you see what you’re spending your money on and identify the areas where a few adjustments can free up more savings.

Base your budget on your own sources of income, not any money you expect to be given by your parents. You can use our calculator to create a comprehensive budget that includes your income and all of your monthly expenses, including rent, utilities, groceries, transport and entertainment. Factor in everything from your morning coffee to the streaming service you doze off in front of at night.

If you’re a BCU Bank customer, you can use the mymo by BCU app to help you categorise your expenses, so you get a clearer picture of where your money is going and where you can cut back.

There’s no one-size-fits-all number for budgeting, but a good rule of thumb is the 50/30/20 method, which divides up your income as follows:

  • 50% of your income on needs (essential expenses like rent and mortgage payments, utilities, groceries, transport and medical fees)
  • 30%of your income on wants (non-essential expenses like gym memberships, streaming subscriptions, eating out, cinema and concert tickets, and new clothes and tech you could live without)
  • 20% on savings

If you already have high-interest debts that you need to pay off, such as personal loans or credit cards, consider focusing on eliminating those first. You can use some or all of that final 20% allocated to ‘savings’ to repay your debts, and gradually increase the amount of money you can actually save over time.

Keep in mind that emergencies happen to everyone, whether it’s a repair bill you weren’t expecting, medical expenses you couldn’t have budgeted for, or the loss of a job you thought you could count on. Don’t let one of these hiccups become the thing that sends you running back to mum and dad for help – you can make your own safety net by building up enough savings to have an emergency fund.

As a general rule, aim to have at least three to six months’ worth of living expenses in your savings to help you get by when the unexpected happens.

Paying yourself first

You know that money that you allocated for savings in your budget? The best way to make sure you actually save it is to keep it in a separate savings account.

When you get paid, move the money you’ve earmarked for your savings to that account before you do anything else, so you aren’t tempted to dig into it while you’re waiting for your next pay day.

If you get paid on a regular schedule, you can use the BCU Bank App to set up automatic transfers to your savings account. Your dedicated savings account should be one that rewards you for saving money, with a higher interest rate to help you build up your emergency fund and work towards your long-term financial goals faster.

For example, our Bonus Saver Account kickstarts your savings with a higher rate of interest for the first four months from the date you open your account, so taking the initiative to set up your own savings account pays off fast. Then there’s our iSaver Account, which pays you a higher rate of interest the more you save – because good habits should be encouraged.

If discipline is your thing and you know you can go without touching your savings for a while, then you can also consider a term deposit. This way, you commit to keeping money deposited for a fixed period, from a few months to several years. In return for making this commitment, you’re rewarded with a higher interest rate.

Once you’ve saved enough to make a dent in your goals – whether it’s buying a house, a new car, or a well-deserved holiday –come see our local lenders about the best loan to get you the rest of the way there, without any help from mum and dad.

Asking for advice

As they’re probably fond of telling you, your parents have seen and done it all, and there’s a good chance they’ve been in your shoes at some point in their lives.

If you have a good relationship with your parents, then this time in your life – when you’re establishing yourself as your own person, with your own money – is as good a time as any to sit down and ask them about their experiences when they started ‘adulting’.

Ask them what they think they did right, and what they wish they had done differently, and take this opportunity to learn from their mistakes.

Soon enough, you’ll reach a point where you don’t need to ask your parents for money anymore – but you’ll never be too old to ask them for advice.

Important information

Banking and Credit products issued by Police & Nurses Limited (BCU) ABN 69 087 651 876 AFSL/Australian Credit Licence 240701. Any advice does not take into account your objectives, financial situation or needs. Read the relevant Product Terms and Condition, before acquiring this product in considering and deciding whether it is right for you. The Target Market Determination (TMD) for products is available on request. Lending criteria, terms & conditions, fees & charges apply.