Three essential money conversations you need to have at home

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Money as a topic is very unconventional to discuss, let alone with your family. Not only is it sensitive enough to ask someone how much you earn? But also, awkward enough to divulge the topic to something else. However, when we are talking about money conversation at home it means family and loved ones, who directly or indirectly affect your own financial planning. Financial planning or home finance topics at home are similar to having a conversation with your gynecologist, meaning no matter how awkward the questions may be, the end result are always supreme.

Moreover, each family member’s view with regards to money is different, for example your spouse may not think investment as important as savings, thus according to him or her savings in bank account may be enough. Everyone is born and bought up in specific surrounding and educational background, therefore understanding even the basic concept of personal finance may be a distant dream.

Therefore, guiding your family through the basic yet most effective financial planning ideas may not only help them in taking better decisions, but also secure their present as well as future. Let us look at the three basic conversation topics which every family must groove into.

Allocating responsibilities and teaching values

Let us start with the outflows of the family. The first conversation should be about the aggregate expenses, in order to avoid double outflows on same expense. Understanding the expenses will help in identifying the duplicate expenses and reduce the cascading effect, for example, if someone is responsible for buying weekly vegetable, and there comes a scenario where someone else also brings in the same veggies, now that’s total waste of money as well as food. Allocating responsibilities to each individual will not only reduce the excess outflow but also create a sense of belongingness. The second part relates more towards the children in your family, who could be the future financial planner. Money for children is nothing but a piece of paper if and only if its importance is not taught to them. Moreover, this is the ideal age wherein children grasp things fast and crisp, therefore teaching them value of money is absolute necessity.

For starters, a monthly allowance for their expenses may be ideal. Subsequently, asking them to keep track of their expenses and taking a fun-filled review of expenses will not be a bad idea. Start giving them perks such as an extra 10% allowance if Rs 100 is saved for the month. This way, you can instill the habit of savings.

Savings and investment

Possibly more boring topic than above but equally important if not greater. Definition of savings may be different of all family members, and not necessarily futile, however portraying your knowledge about savings could do no harm. First target would be to identify the member with least savings quantum and promote their savings habit, like younger brother or sister who thinks the world is at their feet. Secondly would be discussing with your parents their retirement needs and quantum of their savings.

Retirement may not be planned to perfection, however like a necessity, it needs to be fulfilled. Therefore, asking your parents about their savings and creation of a retirement corpus is must. Lastly and most importantly is the discussion with your spouse about your and her savings method. The savings should be categorised into 4 main categories i.e emergency fund, child education, retirement planning & general expenditure and should be made in that order. Now since everyone knows why savings are necessary, it also important to educate the correct ways of savings. As stated earlier every individual’s definition is different, and taking the same in consideration, analysis relating to objective of the savings and the instrument in which the money is invested, is essential. For example, parents’ retirement money cannot be kept in risky funds.

Legacy

Life is full of uncertainties and death is inevitable. In any case, money still remains a necessity. Therefore, a conversation with regards to will, liabilities, assets, term insurance, medical insurance should form part of this discussion. Death in itself is thing of deep sorrow, however if the successors are surprised with unknown liabilities and assets, this will create havoc amongst every family member. Transparency about each other’s dealings is particularly important and it should be done least with your spouse or parents. Just like transparency the need of creation of will cannot be ignored, as it will determine where and how the assets of the deceased will be distributed amongst the members. Will is nothing but a wish of person as to how he wants to distribute his wealth. Subsequently the need of term insurance should not be avoided, especially when there are dependents.

Financial planning with your family members will not only enlighten them about the future, but also create an uncertainty proof environment in your family. Family discussion will result into, sharing responsibilities, teaching children’s values, enlightening your parents and siblings, bringing your and your spouse’s financial objective in one line and eventually wealth creation and its seamless transfer to your descendants.