If you are responsible for a family

Families usually are the basic subjects of financial planning. Every family is unique, but there are some generalities as well. The following may be a good starting point to the exploration of the financial side of the future of your family.

Going through stages
Support systems and responsibilities
Cohesion and peace
Next generations

Most families go through more or less predictable, similar life cycles. The various stages of establishing separate households and homes, raising children, sending them to schools, thinking well ahead about own retirement, facing challenges due to ageing parents, … perhaps this is the most often repeated series of focuses families live through, in more or less this order. All these stages have their own demands for income that can be estimated in advance. Similarly, the income potentials at various stages can be estimated as well. The challenge for comprehensive family financial planning is to reconcile this multitude of factors, and ensure a relatively smooth and even riding through the tides and ebbs (and even the shocks) of these stages for the whole family.

Support systems and responsibilities

If you have a spouse and perhaps even kids, your responsibilities are multiple, and you must prepare for more contingencies than a single adult. Accidents, illnesses, death happen, and one of the many functions of family is to help coping with emergencies and misfortune. It is easy to overestimate the capacity of families in that role. There are limits to the support that even a spouse or a child can provide to a seriously ill person, even with the best intentions. Healthy spouses have their own life, career, … sacrificing too much for too long will surely claim its toll in one or more ways (physical and emotional health, job, financial, marital problems).
Similarly, it is easy to miscalculate someone’s financial contribution, especially if that person doesn’t hold and outside paid job. Thinking of life- or some living benefit insurance, some people deem that an officially ‘non-working’ spouse - the most loved and helpful he/she might be, still - does not have ‘financial value’ for the family, … but usually they do.

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Cohesion and peace

Having an extended family sometimes gives strength to one’s financial future. A large and cohesive family can provide support in many respects, including financial ones. Unfortunately, this kind of families are rather rare today. Squabbling over inheritance, divorce and child support issues, or managing a family business, and other issues tend to crop up and can be quite destructive, especially if there was no proper planning done while relationships were still good.

Family financial planning makes sense also because having family members offers some flexibility, in terms of tax-advantageous income-splitting options, savings on insurance, or creating a tax-deferred investment vehicle. Regarding retirement, it’s important to be aware of some demographic basics: increasing life expectancy, increasing need for long term care (especially at advanced age), and gender differences in these regards.

Next generations

Where there are kids, usually planning for their education is important. In addition, relationship with the elder generation (parents / grandparents) may offer special blessings and burdens. There are many things to consider, and to find good solutions takes time, knowledge, … and a lot of communication among various members of the family about the intended developments or haphazard ups and downs of life.

Teaching financial knowledge, skills, and good habits to next generation (earning, spending, saving, investing, protecting) starts in families, either intentionally, or simply by demonstration. At least certain families consciously build a legacy or strong tradition of their own. Their values, aspirations, lifestyles, or relating to immediate or larger communities all have a financial side as well. Therefore, building and reinforcing those traditions can be greatly enhanced by addressing them explicitly as part of ongoing financial planning.

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