How to Discuss Family FinancesMar 05, 2021
Too often, when families talk about finances it means dealing with some tense moments. “How much did you spend on that?!” Conversations can be more like unplanned outbursts that do more damage than good. As households combine and families get larger, the potential for miscommunication grows.
According to the most recent census, there were over 500,000 stepfamilies and more than 400,000 multigenerational households in Canada. In fact, families with three or more generations living under one roof are the fastest growing household type in Canada. Often overlooked are the financial challenges these families must work through. Combining the finances of two or more households that may include parents, adult children, young kids and/or grandparents can be a complicated and sometimes messy process. To achieve financial harmony, communication is key.
Combined households don’t discuss family finances
Expanding your family typically happens in stages, giving you time to adjust financially. However, combining two households or multiple generations into one can increase your financial responsibilities seemingly overnight. One survey found that prior to moving in together, 40 per cent of blended families didn’t discuss family finances, although most wished they had. If you each come from different backgrounds, parenting styles or money habits, there’s bound to be some conflict. The same can be said for multigenerational families who may be unprepared to take in adult children or elderly parents.
How to discuss family finances in your home
Whether you’re moving in with elderly parents or bringing your parents or adult kids to live with you, it’s essential to get all household members on the same page, at least financially. Instead of butting heads, take some time to improve your family’s financial health by using some of these strategies:
1. Talk about money early and often.
Being on the same page as your partner or other family members can help avoid conflict. Set a time each month to check in with each other and hold one another accountable. Track your progress to stay motivated. Consider scheduling family meetings to learn more about financial topics like credit cards, short- and long-term savings options, retirement savings, credit scores, student loans and more.
2. Set a budget.
If you’re newly remarried with children, budgeting will be essential. You may need to work out childcare expenses or child support payments, along with all the other financial needs for your newly blended family. If you’re accommodating adult children or parents, lay all cards on the table and discuss combined incomes. Decide which family member will pay for what. Or, in the case of an adult son or daughter who is unexpectedly without work, talk about what tasks each family member can take on to keep the household running smoothly.
3. Plan to pay off debt.
If you’re re-married, chances are you’re both bringing your own debts into the marriage. You may also already have joint debt. Now is the time to figure out whether you’ll combine debts or keep them separate. Take time to go over all your debt numbers and plan to pay it off. Debt can seriously hinder your savings efforts and derail your financial goals. If you’re paying down debt and making little progress, compare your debt relief options or speak to a Licensed Insolvency Trustee for advice.
4. Save more, spend less.
More people in the house means more groceries, electricity, hydro and transportation costs. Talk about money–saving strategies that will help cut costs such as shorter showers, shopping smarter, carpooling, etc. Eventually, these become small financial habits that can have a big long-term impact. This is also a good time for spouses to talk about long, medium and short-term savings goals as well as setting up an emergency fund.
5. Balance wants and needs.
A change in family situation is a good opportunity to go over some financial basics with the kids. Sometimes, it’s a good refresher for parents too. Before making a purchase, ask kids to think about whether it’s a necessary expense or a want. Teach them the importance of healthy spending habits, saving up for wants with allowance and birthday money and finding the best value for things they need.
Is your blended family dealing with debt challenges? Meet with a Licensed Insolvency Trustee to discuss strategies for paying off debt.
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