You are not alone if you find talking about money uncomfortable. Money is frequently a cause of stress within relationships and families, but many of us don’t like to raise the topic. It’s okay to feel awkward talking about money, but it’s not okay to avoid the topic completely. Here are some of the conversations you should be having with your family.
Why money conversations with the family are a mustDr Frank Magwegwe, financial planner and founder of Thrive Financial Wellness says that regular money discussions strengthen relationships and let you know you are not alone in concerns around your finances.
If something happens, or could happen, that affects your finances you need to be open and honest about it so that you can deal with it. If you don’t talk about it, you can end up making money problems worse.
A good example is debt. If you get into debt you need to curb your spending habits so you can pay your debt off. This is much easier to do if you talk to your family and loved ones and tell them you won’t be able to go out every weekend or buy expensive gifts.
The second reason is to set a good example to your family, especially your children. The more you show your family you are willing to talk about money so that you all take responsibility and manage your money well, the better your family will be at keeping an eye on their finances.
What money conversations should you have with your family?How do we manage our household’s money and could we do better?
Explain to your family that a budget is the tool that helps you manage your money well. Show them how you set up a budget, explaining income and expenses. You can ask your family to share what expenses they might have and show them how these are part of your household budget. This will help them understand how planning for these expenses in a budget makes sure you can afford them. You can also raise the topic of living within your means, show how your budget helps you do this and explain why it is good financial management to not spend more than you earn.
When you explain your budget, you answer the question parents are often asked, “Can I have ...?” When everyone understands the income and expenses, it’s easier to accept that we can’t always buy what we would like.
How much debt do we have and can we repay it when we need to?
Far too many of us have debt we would like to get rid of so that we have more money to spend on our families and other important things. Debt is a conversation you must have with your family to prevent debt overwhelming you and upsetting family relationships.
What is debt? Let your family know what debt is and how it works. Also explain why some debt is good – a home loan for example - and some bad, such as too much credit card debt.
How you repay debt: Let your family know what debt you have and how you repay it. Also talk about options such as credit life protection so that they know if something happens your debt will be paid.
Use practical examples so your family can see the benefit of being prepared
What will happen to the family if an income earner dies?
Death is a sad topic, but if you take a practical approach and explain what plans you have in place you can prevent your family from worrying about their financial future if you are no longer around. Here is what you need to discuss:
Funeral preferences and arrangements: tell your family where your funeral policy is, who is covered, for how much, and how to claim. Also let them know what kind of funeral you would like. Keep it practical and simple, using examples of how other families and friends coped.
What happens to the home and other assets: Tell your spouse (and your children, if they are old enough) where your will is and what’s in it and also explain that you have a will so inheriting will be as easy as possible for them.
How will future bills be paid: Let your family know you have life insurance that will pay a lump sum they can put towards the family’s expenses. You may also want to let your family know how you would like them to spend your life insurance.
What happens to pension funds and savings: You may have pension or retirement savings that will pay your beneficiaries on your death. Don’t forget to tell your family who your pension fund is with so they can contact them and ask how to claim if this isn’t included in your will.
How will the family cope if an income earner becomes disabled or seriously ill?
Illness and disability can affect a person’s ability to work, and may also come with an increase in medical and living costs - the need for home care, for example. This can put a serious strain on the family finances. There are ways to ease the financial burden, such as insurance and medical aid. Telling your family which of these you have reassures them, and they will know that if something does happen it won’t be a financial disaster.
Medical aid: Make sure your family knows which medical aid you have and what it covers so they can help with claims and know that some or all the costs will be met.
Disability insurance: If you have a disability policy, either on your own or as part of group cover, tell your family what this is and how it can be used to pay for extra medical or rehab expenses and cover income if you cannot work.
Income protection insurance: You may have income protection that pays all or part of your income if you are temporarily unable to work. This can ease the financial burden when you are not earning and ensures your family continues to meet their living expenses.
Dread disease insurance: This pays a lump sum amount if you are diagnosed with a critical illness such as cancer. Explain to your family why you took this cover and how it can be used to pay for medical expenses, living expenses and other extra expenses when you are ill.
Other benefits: Let your family know there are state benefits such as workmen’s compensation and UIF so that they know there will be some funds if you cannot earn.
What happens if an income earner’s salary is cut or they are retrenched?
This is a very real concern in many families right now. If you lose your income through retrenchment, or need to reduce your working hours and take a salary cut, you need to let your family know there will be less money coming in. This will affect your budget, but let your family know that there are plans in place to avoid it becoming a disaster.
Budget: Let your family know you will be earning less and explain you won’t be able to afford luxuries for a while. Frank says you can also put in specific boundaries such as, “we won’t lend money” or, “we will only spend this much on an item”.
Emergency funds: Let your family know you have an emergency fund for this purpose to tide you over while your income is reduced.
Downsizing: If things get really tough you may need to move home to reduce expenses. Always keep your family in the loop so they can see you are managing the situation.
If your income increases, for example you get a promotion, you also need to decide how you will use the additional money such as increasing savings or buying a new property. You can ask your family for ideas on this and decide together how to spend it.
How will changes in our family affect our finances?
When there is a big change in your family your finances will be affected. It may be a birth, elderly parents moving in, children starting school or moving out of home, or the purchase of a big-ticket item such as a car or house. Change is always a good time for conversations so remember to include the financial aspects when you talk about the change.
Make it practical and use examples“Because money is central to our lives, there are everyday events that naturally provide opportunities for money discussions. These include when we are watching our favourite programmes, watching the news, planning to eat out or go grocery shopping,” says Frank.
Keep the conversations with children age appropriate such as sharing how much municipal rates, groceries and school fees are. “As children grow, parents can even discuss how much they earn, what are the bond and car repayments, how much is insurance, and saving for retirement.”
He says you can structure regular money conversations to make them fun and less threatening by focusing on things that you want to achieve as a family and making sure how you talk about money, spend money and save money reflects these goals.
What ifChildren, and adults, ask a lot of questions because they are curious about life, and sometimes a little worried. Having money conversations with them, and other family members will take away some of the uncertainty and answer some of their questions in advance. And you’ll be building a money-savvy future generation!