Money can be harder to talk about than politics or religion. But, talk about it at home to create good financials
Money; some say is the axis around which the world spins. They’re speaking figuratively, of course. But if we just take a look into the lives we lead, money is a major enabler. It is the closest thing we can exchange for happiness. To survive in this material world, it is as vital as oxygen. Still, why is it difficult for us to have a decent conversation about money?
It is perhaps because any conversation surrounding money can be loaded with lot of tension and fear of being judged. For some, it is even harder than the ‘birds and bees talk’ which most Indians shy away from having with their children—leaving for the little ones to figure out for themselves with time. However, when we put off hard conversations for later it is not just benign procrastination that we do, we also create the unnecessary burden in the air. The sooner you cross some bridges, the better. We all know, without attention no problem is capable of solving itself.
Family Day
May 15th is celebrated as International Day of Families by the United Nations. The theme this year: family, education and well-being. Given the propensity of Indian families to talk about several things but money, which is the most obvious form of material well-being, use the opportunity to set it right this year by making a start.
Think of a typical Indian family and the image that comes into our mind is not the same as what would have been a decade ago. “As India is going through the social change of moving from a joint family system to nuclear family system, the evolution of money management in the family context also has to evolve with this important change,” says Uday Dhoot, Founder, Oyepaisa.com. A big change is evident in most families where both the husband and wife are working and contributing towards the household expenses.
“In older times, in most households, the male members would largely deal with money related matters. This worked well in large families with many male members. But as our family sizes have become small, we need to depend more upon each other to take care of financial matters, this becomes obvious in case of emergencies (medical or otherwise) but also on funding important life goals,” adds Dhoot.
The biggest barrier for most families is not being aware of when or how to make a start. “Initially you may have to take the initiative to talk about money openly at home. But with time, it should come as a very natural topic, something which comes up passively in discussions,” says B Srinivasan, Director, Shree Sidvin Financial Services & Investments. It is very important for all members to have an understanding of the unique financial condition of the family. So, conversations between spouses, with parents and with children should all be encouraged.
Money talk with spouse
“I have observed: money is a major reason for most of the discontentment between spouses. It is important to have absolute clarity when it comes to the handling of finances in the family to avoid such frictions,” says Srinivasan. This probably is the reason for most financial planners to mandate the presence of both the spouses when discussing about family’s finances. “During the meetings I have with my clients, I make it almost mandatory for both the husband and the wife to attend,” he insists.
“We involve both husband and wife in the financial discussions so that they are aware about where they are. Spouses many times are oblivious to the real financial situation.” says Suresh Sadagopan, Founder, Ladder7 Financial Advisors. Giving an example of a client, he further establishes the dire need for spouses to be transparent with each other with money matter. “There was a spouse who was insisting on a home. Our calculations indicated that it was just not possible. We asked the husband to first convey this. Then we asked both of them to come and meet us.
We explained their situation and why buying a home now is not feasible as it affects other significant goals. We also showed her when they can buy a home. That brought clarity and peace at home,” narrates Suresh.
Some financial planners feel that since the demonetisation fiasco last year, the talk about money is not such a taboo anymore. “Post demonetisation, I witnessed a lot of people talking about money in their families as everyone was anxious and even children wanted to know how it affects them,” says Jaipur based financial planner, Ramesh Maloo. He goes on to say that during demonetisation he came across several people who had saved money without any knowledge of their spouse. “The same money, if invested in equity mutual funds over time could give phenomenal returns. So it’s necessary that spouses talk about money matters and take decisions after discussing,” he adds.
Financial planners see that their clients are more than happy once they get started with talks on money at home. “From what I see with my clients, hardly five per cent people have negative thoughts about discussing finance openly in the family. Almost everyone has an extremely positive attitude about being open about finance matters within the family,” says Srinivasan.
According to Dhoot, in families that have professionals and services background, spouses talk openly about money matters. And, some families actively involve their kids and parents in such discussions. These discussions are largely around asset purchases like house, car, and so on, loan repayments, education planning, holidays etc. “Conversations on money can help the members of the family have reasonable expectations as everyone would have a better understanding of what the family is able to afford and what the financial and other priorities of all members are. As money is a rather emotional subject, this might also create better bonds and a sense of responsibility within the family,” adds Dhoot.
Talking money with children
Just the way you benefit with an early start in investing to plan and achieve long-term financial goals, talking about money with children will help them understand the value of money and inculcate frugal habits when it comes to spending money. After a house, the next big financial goal for most Indian parents is the child’s education. Several times, in pursuit of giving their little ones the best, parents send their kids to the most expensive of schools. It is not necessary that children in those schools are all from the same backgrounds.
However, due to peer pressure, their material aspirations are more or less the same. “It is very important for parents to tell their children what they as a family can afford to do and not. Children should be well aware of their family’s unique financial position,” says Srinivasan. Parents should explain to children what the family’s financial goals are, what are the ways and means to achieve them, the practicality of aspirations, expenditure pattern of the family and the ability to balance today and tomorrow. “It may surprise you to know how understanding children can be,” he adds.
“Parents seldom discuss money with children. Many times what a parent does is also wrong and gives wrong signals to the children about money. So it’s a double whammy,” warns Sadagopan. Once children understand the basic concept of money, it’s always a good idea to involve them in financial decisions. “It is important that parents involve their kids in small financial matters. Like preparing some accounts for the family budget, paying some bills, doing some banking related work, etc. This way kids feel excited about doing stuff and at the same time, get comfortable handling money,” suggests Dhoot.
A family is a unit, and a unit cannot function without genuine interest and understanding of all parties involved. Several times, people hide their problems—especially within their families. The society has conditioned us to put up a happy face in times of atrocities and that has deeply affected with how we interact with the world and the problems thrown at us. The first step to better understanding is conversation. Conversation between spouses, between parents and children, between parents and grandparents, and even among siblings revolving around money is as healthy as talking about the latest blockbuster or the IPL results.
Your family is your own; love it or tolerate it, there is no running away from your set of perfectly imperfect people. For the love of family, start being honest with each other as it is the best policy; even when it comes to the most taboo of all topics—money.