Monday, August 17, 2009

Finances Are A Family Affair

We’ve all been learning a lot more lately about economics and investment practices than we ever thought we would… but do these lessons from the global economy transfer to the family circle?

Studies have shown that most families have one person who takes care of all the finances: paying the bills, setting aside money for investment and savings, planning the family budget, etc. This may be convenient in the short term, but it can create long term problems. If both partners aren’t aware of the family budget and financial status there can be a tremendous disconnect in spending habits, leading to resentment and often a slow decline into debt.  Furthermore, what happens to the family finances if the “accountant spouse” dies or becomes incapacitated? The surviving spouse often has no idea what the family financial status is, or even where accounts or investments are located and how to access that money. The best solution is for couples to talk about their finances often, or take turns being the family CFO.

Even children benefit from a certain amount of involvement in the family financial planning. Having a regular allowance or earning pocket money for chores not only teaches kids about money management, but also helps them understand when they have to wait to get that new video game, or when the family may have to cut back on certain luxuries. Including children in certain financial decisions, such as which charities to support or how to spend surplus cash, teaches them accountability, and that the choices they make can have a lasting impact.

Many of us look upon our finances with dread; but it doesn’t have to be that way.  Skill with money matters can bring us just as much pride and joy as skill with a paintbrush, tennis racquet, or any other skill that must be acquired with practice and hard work.  With a little education, and the involvement of the entire family, we can all become the masters of our own financial futures.