Family households can vary widely in make-up, based on caregiving needs, economic conditions, and cultural traditions. It’s common to find multiple generations living together, or financial support exchanged between loved ones in separate households; in fact, such situations represented more than half of respondents to a recent survey by the National Endowment for Financial Education (NEFE).
With this in mind, an individual or nuclear family approach may not feel adequate for those managing finances intergenerationally. However, budgeting sustainably and saving for the future are common goals, regardless of your household make-up.
Similar to personal money management, multigenerational money management is not one-size-fits-all and will likely require regular reflection about how to accommodate shifting needs and goals. So, here are some strategies to consider when it comes to multigenerational money management.
Establish Needs and Responsibilities
One of the main reasons that managing finances across multiple generations can feel strained is because of competing needs and priorities. For instance, for family members with children under a certain age, childcare is a priority that may require a substantial amount of their budget to manage. For others, healthcare or illness-related costs may be more significant a concern. That’s why it’s important to be open and communicative, so that one person or group’s concerns aren’t favored at the expense of another’s.
Part of that openness involves discussing topics that may feel uncomfortable, such as income and spending. However, doing so may help identify solutions, from sharing living and transportation costs to bundling insurance or refinancing loans with a co-signer in the household. It may prove useful to have one financial “captain” to help manage shared expenses, as well as to bring in legal or tax experts for more complex or long-term financial needs.
Regardless of how you decide to divide the responsibilities within your household, it’s important to remain flexible and respond to individual and collective concerns as they might arise. Set an intention to regularly check-in as a household about how roles are fitting and expenses are being managed to help ensure everyone involved is taken care of, especially as needs and goals change.
Set Budgets and Boundaries
Once you’ve established your needs and related costs, next you’ll want to determine how to allocate resources to cover them. This may mean pooling income, splitting living expenses, or following a joint budget so that those resources are used judiciously.
Equity, over equality, is key here: consider how to divide expenses based on a formula that accommodates abilities, contributions, and usage, rather than an average percentage. Ultimately, you want to outline agreements that everyone in the household can comfortably meet, so that ideally all pay less after consolidation than they would individually.
That said, not everyone may be comfortable with contributing most or all of their income or assets in a multigenerational environment, so consider what boundaries you may want to establish between what’s held by an individual versus the family. Holding separate bank accounts for different purposes, shared or not, may be helpful to organize funds accordingly.
Learn More: What Is the 50/30/20 Budgeting Method?
Acknowledge Goals and What-Ifs
A key consideration for multigenerational households is how to prepare for change, which can look like reaching personal milestones, encountering potential setbacks, or anything in between. For instance, one part of your budget might include saving toward an emergency fund, which could support your household for three to six months if needed. Other, longer term goals might include members of the family attending college, undergoing an elective surgery, or retiring, and accounts like College 529 Plans, Health Savings Accounts, or Individual Retirement Accounts may help to maximize your savings for such purposes.
As a part of your regular conversations as a family, it will be important to discuss “what if” scenarios, even those that are unlikely, to better understand how to make decisions that reflect personal and household values. How will caregiving or healthcare be handled in case of emergency? Who has access to financial accounts or holds power of attorney, and should there be joint holders or alternate plans set in place? Also, consider how property or businesses should be handled in their owner’s absence and ensure that legal estate planning and succession planning documentation reflect these choices.
What Multigenerational Households Share: Final Considerations
In most households, finances are often shared in order to be more efficient with expenses and save toward joint goals. The same goes for multigenerational households, even if it can be a little bit more complex to accomplish. Above all, communication and mutual respect go a long way in helping ensure that every family member feels supported and taken care of in this environment.
Multigenerational households can invest in themselves by staying vigilant about financial literacy and cybersecurity, especially for those managing finances on behalf of others. Leaked or hacked personal or financial information could have an impact on more than just the victim.
If managed well, however, multigenerational household finances can benefit all involved, creating a foundation of wealth that can be stewarded for years—or generations—to come.
Have questions about how to leverage your bank accounts to support your family’s unique story? SouthEast Bank’s team of experienced local bankers are happy to help! Explore our accounts online and, when you’re ready, stop by or make an appointment at your nearest branch.
Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as financial, legal or tax advice. An attorney, financial advisor, and/or tax advisor should be consulted for advice based on your circumstances.
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