Discussing Family Finances: Things to Keep in Mind

We all love our family, and it is this love that often keeps us up at night, worrying about their future. If something were to happen to us, would they be provided for? What can we do to give them a financial cushion to help maintain their lifestyle and fulfil their dreams? Most people opt for insurance cover to take care of their family’s financial needs if such a situation ever arises.

But relying solely on insurance is like the proverbial “Give a man a fish, and you feed him for a day” scenario. Instead, teaching him to fish, as the proverb suggests, is feeding him for a lifetime – or in this case, teaching your family to manage finances can make them financially independent.

Financial independence begins with awareness through honest discussions. While most of us have learned how to handle money by observing our parents, the truth is families rarely indulge in open, transparent conversations about money. If such conversations were encouraged, financial wisdom could be passed down from generation to generation, helping the young ones make fewer mistakes and be more mindful of their finances.

Managing Family Finances Comes Unannounced

Most families talk about money only when an emergency hits. Sometimes, the death of an earning family member forces certain family members to step into the decision-making role, leaving them rather lost. To avoid such nasty surprises, it is important to cultivate a culture of conversations around finance. Each person in the family – your spouse, kids, even your elderly parents – needs to know what to do, whom to call, and how to manage financial matters in case of an unforeseen event.

Despite having the same objective, the tone and approach to these conversations change depending on who you are talking to. The educational approach works for children, but not parents. How do you find your way around such a difficult topic?

Discussing Finances with Your Children

Your children look up to you for financial guidance. There are three main things you can do to strengthen their financial foundation:

1. Start early: Habits instilled in kids at a young age become a part of their routine. Small steps such as giving pocket money for completing their house chores or saving pocket money to buy their desired game console can imbibe the habit of saving from an early age. Encouraging small summer jobs or businesses like mowing lawns, babysitting neighbors’ kids, or dog walking to earn some money can teach them concepts like budgeting and financial planning.
2. Encourage conversations about money: Including your children in money discussions and decisions gives them a glimpse into how money works in the real world. Let them participate in simple family goals, such as budgeting for groceries, buying a new appliance for the house, etc. Teach them how to compare prices and choose essentials first, treats later, without exceeding the budget. Answer any questions they might have patiently and tactfully to shape their money management skills as adults.
3. Involve them in major decisions: As your kids grow older, include them in major family decisions such as buying a new car or house, funding their college education, saving for medical emergencies, etc. Most importantly, encourage them to share their ideas and respect their opinions by being receptive and open to them. Wherever possible, reiterate the importance of understanding the value of money and saving for their future.

Discussing Family Finances with Your Parents

Conversations with your parents revolve around practical solutions to their future finances. Understanding where your parents stand financially right now, planning for their future needs, and also knowing what they expect from you when the time comes for you to take over certain duties should be the object of these discussions.

1. Word it well: Talking to parents about money can be uncomfortable for both parties. Choose your words carefully and be patient with them. Involve the entire family and try to assuage any fears your parents might have about their financial situation.
2. Get clarity: Take stock of their current financial situation, including any debts, property or asset ownership, and insurance. Talk to them about important documents such as insurance papers, wills, estate plans, and power of attorney that you may have to handle in an unfortunate event, and make sure they are kept in a secure place.
3. Support their wishes: Growing age and failing health often erode confidence, especially when it comes to financial matters. Your parents, too, might be stressed about their future. Having understood their current financial condition, help them plan for their needs and desires accordingly, so that they can enjoy their sunset years to the fullest.

Discussing Finances with Your Spouse

Your spouse is your partner in life and in the family’s financial decisions.

Whether your spouse is earning or not, including them in all family financial matters is their right. Keeping them in the loop about any debts, loans, insurance, investments, documents, inheritances, bills, or even petty cash is vital. They must know what banks the family holds accounts in, whom to contact in case of an emergency, who your portfolio manager is, etc. Staying transparent and honest with them about every single financial decision in the house is important to keep the family united and strong.

How a Family Can Improve Finances Together

• Pooling your finances, sharing your views and concerns, and brainstorming together to resolve financial problems is the best way to keep your family financially strong.
• A debt-free family is a happy family. Gather all information about your debts, interest rates, and minimum monthly payments. Work together as a family to prioritize paying off debts.
• Do a family brainstorming session to think of ways to encourage small savings. Make a family resolution about carpooling, turning off lights when not in use, unplugging electronics, and taking turns making meals instead of going out for meals frequently, thus saving on food costs.

Include your children by transforming these into fun ideas and making it a part of your family routine.

For major decisions regarding family finance, turn it into a serious meeting, complete with an agenda, date, and time. Focus on the issue at hand and be transparent about any concerns and challenges.

Keeping the Objective in Focus

While implementation can be made fun, the seriousness of the objective should not be diluted. Write down the points to be discussed at family finance meetings and take notes during the meeting. Keep an open mind and be respectful of contrasting opinions between siblings or spouses. If conversations get too heated or personal, end the meeting and try again later. Keeping emotions at bay is important to resolve serious financial issues, especially when family is involved. But if handled tactfully, your family can be the most helpful, healthy, and encouraging team you’ve ever worked with.

Contact XXX in XXX to Help You Manage Your Estate and Family Finances

Talk to an accountant and business advisor to help you manage your family finances from debt to investments, will, and estate planning. Our team can help you ensure family members are financially sound. To learn more about how KSSP Partners LLP can provide you with the best accounting and business advisory services, contact us online or by telephone at 289-554-5997.