‘Under pressure:’ Young Aussies over-estimate the bank of mum and dad

Younger Australians are over-estimating their inheritance as cost-of-living and stagnant wages means they need more than older Australians will be able to give them.

New data released by Colonial First State shows Australians aged between 18 and 29 expect to inherit a whopping $525,000 on average, when the family home and leftover super is factored in.

These high expectations come as younger Australians look to the older generations to help secure their financial future.

But a combination of rising aged care costs, changing government regulations in the space and the sheer longevity of older people means this optimism around how much they will inherit is “misplaced.”

CFS head of technical services Craig Day warned these high inheritance expectations will come “under pressure”.

“When you think about what older Australians are staring down the barrel of including longevity and rising aged care cost, this ($525,000) expectation is going to come under a lot of pressure,” he told NewsWire.

“A lot of the assets that are earmarked to be paid out as an inheritance may in the future be needed elsewhere.”

CFS says most older Australians intend to leave something behind, but many underestimate just how much they will have left.

The family home, vehicles and any remaining superannuation top the list to be passed down to the kids, but investment portfolios and other property have largely been earmarked for retirement income.

CFS chief executive of superannuation Kelly Power said young Australians also need the money.

“Young people are increasingly relying on the wealth of their parents or grandparents due to rising living costs, stagnant wage growth and housing pressures,” she said.

“At the same time, older generations are navigating the complexities of retirement planning. “They want to support their families while ensuring their own financial security.

Mr Day urged older and younger Australians to openly talk about their financial futures.

“It’s important that young and old can discuss their expectations and plans openly. By having these conversations early, families can ensure that everyone is on the same page and can make informed decisions that align with their values and goals,” he said.

“It’s why we’re saying it’s really important for families to have these conversations so they don’t get to the point where it’s oh bugger, I was expecting this much to pay off my mortgage before I started saving for my retirement but there’s not much left.”

Mr Day also said younger Australians should look at their retirement needs as early as possible, even though “the realities of life” including cost of living pressures can make it harder to think long-term.

“It’s never too early to start planning for retirement,” he said.

“The sooner you plan, the easier it becomes because you get the benefit of that compounding big snowball rolling and it helps you achieve your objectives sooner.”