Discussing financial decisions with your family

We generally share all matters and decisions with our families. This can be as simple as when to go shopping or more complex ones like planning a vacation abroad. How-ever, most people ignore or forget to include their family in financial decisions.

Finance is a very important part of family life and all the members in the family should be actively involved in this. Some people may discuss this superficially, but not give these matters the importance that they deserve.

In India, mostly the breadwinner in the family takes all the financial decisions. The spouse (in many cases, the wife) is left out either because she does not have the knowledge or is not interested in being involved. However, it is critical for all family members to be involved in financial matters. Here we tell you why.

You must never undermine the capability of your spouse or children when it comes to discussing financial matters. It usually happens that the financial goals of both you and your spouse are the same — educating the children, getting them married and having a secure retirement. However, your family may want some of these goals handled differently.

For example, your spouse may want to spend the retired life in a different city, which may cause changes in your retirement savings. Similarly, your child may want to graduate in a different stream, which may again require you to change your savings plan.

These valuable inputs can either help reduce the goal outlay (if you child opts for a less expensive course) or require you to increase your savings (if your wife wants a more lavish wedding for your child).

Do not forget that all the financial planning you do is for your family, and if they are unhappy with your financial decisions, then it is of no use. Your financial plan can get a different view, more practicality and more clarity with valuable inputs from your family members.

This is the most important reason for which you must involve your family. In your absence, your spouse and children should know how to handle your finances. Even if you have been prudent enough to indicate the names of nominees in all your investments and insurance policies, the nominee (either your spouse or child) should actually know about these investments to benefit from them. Make sure you educate all family members about your bank accounts, insurance policies, physical and financial investments and liabilities, so

that they can manage in case of your untimely death. It is also important to make them aware of the procedure to claim the money.

Your children are far smarter than they may seem to you. Although they learn a bit about money in school, actual learning comes from practical experience at home. Involve your children in all discussions.

If the children are very small, you can still make them learn the importance of money by explaining what happens when you shop for their toys. Older children should be made aware of more serious aspects in case something happens suddenly to both their parents.

Make them spend on their mobile bills and other expenses from their pocket money and teach them to account for all income and expenses. Explain how money comes into the family and where it is spent, so that they get the overall picture and not just about their pocket money.

It is important to be open to your family about the financial situation, be it favourable or otherwise. If you simply give an amount every month to your wife and children and let them spend it, they will not understand your struggles in managing the finances.

Involve your family when you create the monthly budget and let them know how it stands at the end of the month. This will make them more sensitive to the overall financial situation of the family. You may even see them spending less and saving more, which will benefit the financial position.