A woman has sparked debate online after revealing her parents are still helping her out financially, despite her now being in her 40s.
Writer Rakhee Ghelani shared a first-person account on the Sydney Morning Herald, detailing how her parents – who are both retired – are helping her to reduce the amount of interest that she has to pay on her mortgage in order to pay it off faster.
Insisting she has always been financially independent, Ghelani recalled how she got her first job at 15 – which continued right through her time at university – before she began full-time work as a graduate at Deloitte.
After saving money each month while living in a shared house, she decided to buy a property of her own at the age of 25. Unfortunately, her bank was reluctant to lend her the cash she needed, prompting her parents to offer some financial help.
“My parents came to rescue with an alternative – they offered to guarantee my loan. I didn’t see this as being anything out of the ordinary or incompatible with my independence,” she wrote.
Ghelani explained that many Indian families, such as her own, often own homes jointly with family members, while choosing to live and raise children together in the same household. They therefore see that property as a “communal asset”, with everyone contributing and later benefitting from joint wealth.
She explained her parents have built up a healthy savings account over the years and aren’t reliant on their superannuation to fund their retirement. Instead, they only withdraw the minimum necessary amount of 6 per cent a year. Here, Ghelani appears to be referring to the rules on minimum superannuation drawdown that are set by the government.
Although no one is forced to access their super at any age, retirees who’ve opted to create an income stream from their super balance must withdraw at least 4 per cent of their total balance every financial year as income. The minimum drawdown increases with age, hitting 14 per cent per year for 95-pluses.
People with a very large super balance, for whom even the minimum drawdown creates more income than they require, could theoretically find themselves with excess cash. In this case, that’s exactly what happened, as Ghelani admitted her father even told her recently that he feels like he sometimes has too much cash.
“Like many Baby Boomers, they’re flush with cash thanks to years of hard work, large superannuation balances and the minimum superannuation pension payment rules,” she wrote.
Meanwhile, term deposit rates are at a historical low which means there’s less benefit than there was in the past to be gained from placing this excess cash with a bank to earn interest.
From what the Sydney Morning Herald reports, Ghelani’s parents have decided that, rather than receive the low rate of return available on bank deposits, they will place their excess super income in her mortgage offset account.
Offset accounts work by offsetting the amount in the account against the total mortgage balance, which then reduces the amount of interest payable on the mortgage, allowing Ghelani to put all her repayments to work on reducing the balance of her mortgage.
And since Ghelani’s parents don’t appear to receive the Age Pension, and in any case the sum is a loan, not a gift, handing over the cash temporarily wouldn’t, in theory, impact their income.
It worked, as she admitted she’s close to being able to pay them back again now. However, she revealed she did feel some guilt that she was so fortunate while others weren’t.
Ghelani’s story received a mixed response from readers, with some claiming it showed a lack of independence to ask parents for financial help at her age.
One commented on the article: “This doesn’t sound very independent at all!” However one of the publication’s money editor immediately responded: “Well, that’s a matter of perception. She explains why it’s not at odds with her definition of independence.”
Meanwhile, one Twitter user hit out by writing: “This is about the last thing I would ever brag about,” while another added: “Not really part of the culture here, were kind of on our own here.”
However, another reader defended her choice, adding: “Good strategy. Nothing wrong with helping family out.”