Why giving kids a lump sum of money is a bad idea

Giving kids a lump sum of money to help them on their way in life may give you a warm fuzzy feeling (or not) but it is unlikely to boost your pension and you may end up worse off.

The rules can be a bit complex but essentially Centrelink counts only the first $10,000 of your lump sum gift.

For example, if you have $200,000 in the bank and you gift $100,000 of that to your child, Centrelink will reduce your assets by only $10,000

This means that your pension will be calculated as if you still had that extra $190,000 in the bank - which won't give your fortnightly payment a significant boost.

Meanwhile, your bank account balance has dropped to $100,000, potentially losing you thousands of dollars a year in interest.

Before you gift a large amount, consider whether you can afford to lose the income and whether your kids are really worth it (kidding ... or am I?).

Better yet, just stick to giving amounts under $10,000.

To help you make the right choice, check the gifting rules online at humanservices.gov.au or call the Department of Human Services on 132 300 and speak to a financial information officer.

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