Lifestyle Parents’ housing wealth helps kids get ahead

Parents’ housing wealth helps kids get ahead

Adult children inheriting or being given wealth from their parents are more likely to have completed university degrees, start their own business and have higher bank account balances, a new study has found.

The study, by researchers from RMIT University and Curtin University undertaken for the Australian Housing and Urban Research Institute, explored how intergenerational wealth transfers, which are typically financed through housing wealth, influence the education and careers of beneficiaries.

Co-author Professor Gavin Wood, from the RMIT Centre for Urban Research, said that although people who have received cash transfers or bequests from their parents make up only about half the labour force, a significantly higher proportion of them are self-employed.

“Young Australians who receive inherited wealth and parental cash transfers financed from housing wealth are being helped by booming house prices,” Professor Wood said.

“They have more financial assets that can act as a buffer to meet income shocks, and collateral to relax borrowing constraints.”

“Therefore, they may be more likely to take risks, like financing their own business ventures.”

He said these people are also more likely to hold a Bachelors degree, and their average bank deposit account balances are more than double those of non-beneficiaries.

While it may seem like good news for young Australians lucky enough to be recipients of housing wealth, this could entrench and even exacerbate inequality in lifetime economic opportunities.

“Intergenerational transfers are an important feature of contemporary family life, and housing wealth is an important direct or indirect funding source for these transfers,” Professor Wood said.

“But if intergenerational transfers become increasingly important as a pillar supporting educational, housing and business start-up opportunities, policymakers will need to heed the consequences for children of less well-off parents who are bypassed by the intergenerational circulation of housing wealth,” he said.

Read more about the RMIT study here. Story credit: RMIT newsroom.

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