Intergenerational housing wealth helps children get ahead in education, business

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Adult children who’ve inherited or been gifted wealth from their parents are more likely to have completed university degrees, be self-employed, and have higher bank account balances, reveals a new study.

The report – A new look at the channels from housing to employment decisions – was undertaken for the Australian Housing and Urban Research Institute (AHURI) by researchers from RMIT University and Curtin University. It explored how intergenerational wealth transfers, which are typically financed via housing wealth, influence the education and work careers of beneficiaries.

One of the report’s co-authors, Professor Gavin Wood from the RMIT University Centre for Urban Research, said that although the proportion of beneficiaries in the labour force is roughly the same as non-beneficiaries, a much higher proportion of beneficiaries are self-employed.

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

Moreover, people who receive cash transfers or bequests from parents are more likely to hold a bachelor’s degree, and their average bank deposit account balances are more than double those of non-beneficiaries.

Between 2002 and 2012, about 1.8 million Australians inherited money at least once, and the average amount of each inheritance was about $79,000. 

While financial windfalls spell good news for beneficiaries, this could entrench and even worsen inequality in lifetime economic opportunities.

“The evidence presented in this report confirms expectations that intergenerational transfers help beneficiaries to ‘get ahead,’” Wood said. “But if intergenerational transfers become increasingly important as a pillar supporting educational, housing and business start-up opportunities, policy-makers will need to heed the consequences for those children of less well-off parents who are bypassed by the intergenerational circulation of housing wealth.”

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