Money is often a touchy subject for discussion. Usually kept out of dinner conversation, money directly influences interactions and even emotions among families. It can be very difficult to talk about, but families should practice transparency when making financial decisions. This will not only express the principles behind funding, but will also foster learning among family members to understand the logistics of family finance. As with any pressing situation, communication is key.
According to Professor Nemzoff, a leading expert in family dynamics and scholar at Brandeis University, family relationships can be problematic if financial transparency does not exist. Emotions flare when money enters the conversation, but talking about funding strategies will ensure that family members are on the same page and understand the reasoning behind financial decisions. The trick is to minimize surprises through financial literacy education, starting at a young age and continuing throughout a lifetime.
Parents and Young Adults: Building a Foundation
When a young adult asks for funding from his or her parents, the response will be different based on family principles. Some parents may just hand out cash at their kid’s discretion, others may give out loans, while others may charge interest and ensure repayment in the future. Regardless of the type of funding, it is important for parents to teach their children about basic financial principles. Without proper parental guidance, children may enter the world of personal finance knowing little to nothing about managing money, which will ultimately lead to poor financial decision-making. Therefore, it is crucial to educate teenagers in financial literacy.
Teaching teens about financial management helps them grasp the concept of spending versus saving. This illustrates the importance of fostering financial literacy at a young age. Allowances, checking accounts, and early employment are all building blocks for young adults to begin to understand how money works in principle. Teaching them how to manage a checking account, keeping a budget, and paying off a credit card will ultimately determine future financial success. Once children reach adulthood, financial situations tighten and can lead to increased family tension. In her book about parenting adult children, Don’t Bite Your Tongue, Nemzoff presents communication tactics to sustain lifelong relationships, and stresses financial transparency among family members.
If parents do not have a 401k, they may be reliant on their children to take care of them in the future. In this case, the parent must inform their children in order to ensure financial stability, aside from social security benefits. They must discuss the situation and arrive at a long-term funding solution early on. Thus, over time, communication helps minimize surprises that could be detrimental to one’s budget.
Imagine a family with two adult children, both successful in life, but one more financially fit than the other. Two approaches emerge when funding more than one child. The “what is fair” approach suggests that both siblings should receive equivalent amounts of funds during his or her lifetime. The other approach, “to each according to his or her needs,” represents a family financial support system that decentralizes money as a focal point in family relationships. This allows for flexible financing based on needs, however, this may lead to a sense of favoritism if one sibling is receiving more funds than the other.
Should the parents offer more funding to the one child if he/she is struggling financially? Would that be fair to the other? These questions challenge the structural role of money in family finances. “Everyone makes assumptions,” says Nemzoff. Whatever the financial situation may be, the most important part of family finance is communication. If parents explain the reasoning behind funding, their children will understand the motives behind the decision and confusion will fade.
Ensuring Financial Fitness
While finance is often a touchy subject among families, Nemzoff emphasizes the importance of communicating about financial decisions because whatever the situation may be within a family, transparency is key. Just like the infamous “sex talk,” discussing financial decisions one time just isn’t enough. Ongoing financial fitness calls for open discussion throughout the span of a lifetime. In this day and age, generational gaps can be barriers to communication, but it is essential for family members to openly discuss decisions and motives in order to ensure healthy financial fitness.
Whether we like it or not, money is tied to emotions, dreams, success, and love. Thus, money plays an integral role in our family relationships. Because families are each other’s social safety net, financial decisions should be transparent to all family members as an on-going topic of discussion.