Many families delegate chores and other responsibilities by assigning them to particular family members. You might be responsible for mowing the lawn every week, while your partner takes care of making sure your cars get regular maintenance, your son cleans out the cat's litter box every few days, and your daughter puts the toys away every night. By giving everyone something to do, you not only make sure that important things get done, but you also create an environment of teamwork.
Unfortunately, the same parents who do such good jobs of incorporating each other and their children into the day-to-day life of the family often fail to extend their efforts to financial matters. Instead of openly including everyone in discussions about family finances, one adult frequently takes primary or even sole responsibility for all aspects of the family's financial plan.
By making each member aware of elements of the family's finances, you can avoid many problems that come up when only one person handles everything, and contribute to your kids' financial education at the same time.
The costs of silence
Since time management has become such a huge challenge for families, having one person in charge of financial matters is understandable. Involving both partners with the finances takes away time that they could spend doing other things, like being with their children. Often one partner seems to have a knack for dealing with money, while the other prefers to take a secondary role.
But there are downsides to this approach. First, when only one family member completely understands the family's financial situation, it is much more difficult to reach a cooperative solution to a financial problem because the other family members cannot contribute to an informed discussion. As a result, the person in charge often tries to impose a solution on everyone, and that can lead to family discord. This might be why couples fight about money matters more than they do about any other subject.
Second, if one family member has complete control over the family's finances, the rest of the family often becomes completely dependent on that person. The resulting imbalance in power can create its own problems. For example, the person handling finances has the ability to hide financial mistakes from the rest of the family. Furthermore, if that family member dies, or if the couple splits up, then the rest of the family may have absolutely no idea how to manage even the simplest of financial matters.
It's easy for a surviving partner to become completely overwhelmed when confronted with paying regular living expenses, managing the family's investments and debts, and trying to understand the financial plan that the deceased partner had in place. Some people are so grief-stricken that they never successfully address these matters. They soon face bill collectors -- sometimes even foreclosure and bankruptcy.
If you're handling the family finances, you don't have to tell your family about every little thing that crosses your desk. However, you should keep your partner informed about the general state of your family's financial situation. Knowing basic information like income and expenses, total net worth, and the types of investments you're making is critical to your partner in helping you make financial decisions for the family.
In addition, you should create a detailed list of all important financial information, including the location of estate-planning documents, names of financial institutions that hold family investments, and a summary of regular expenses you pay. This list will allow your partner to handle the finances if you become are unable to handle them yourself.
Kids' financial education
Teaching your children about money is an extremely important part of your parental responsibilities. Because most schools lack any significant education about finances, it's up to you to create a strong foundation of knowledge that your children can use to guide their financial decisions.
How you talk to your children about money depends on their age and comprehension level. Young children can grasp simple concepts like saving coins in a piggy bank. Many financial institutions allow children to open special savings accounts that waive minimum-balance requirements and thus let children save whatever they can deposit, no matter how small.
As children grow, they gain experience in handling money and understand the trade-off of spending now and going without later versus saving now and spending later. At some point, it's appropriate for educational purposes to discuss the investments you are making; if your child demonstrates an interest, you may want to let that child offer some input about investment choices or even open a small investment account for your child to manage under your supervision.
You may find that by involving them in financial matters, your kids may provide valuable information that you, in turn, can use for investments. After all, because many companies target children as customers, your children's opinions about whether they're the next big thing or the next big flop carry a lot of weight.
Handling your family's finances isn't just one more chore. It's a responsibility that has a constant influence on every member of your family. Keeping each one actively involved in and aware of the family's financial plan not only prevents problems from arising but also creates an environment of openness that will improve your children's understanding of financial matters. They will learn valuable lessons that will guide them all their lives.
This article was originally published on Sept. 15, 2006. It has been updated.