Living in a multigenerational household has its own unique challenges. In this post, I’ll walk you through some practical tips you can use to navigate your finances in your family (whether you’re living with grandparents, adult children, or both) and I’ll share stories from my podcast guests who faced similar struggles that you can learn from.
At the end of the post, I’ll also share my Monthly Money Meeting Guide that you can use to kickstart managing your family’s finances in a stress-free way.
Understand which type of multi-generational family you have
There’s more than one type of multi-generational family, and the first step is understanding the type you have. So let’s take a look:
- Three-generation households: Typically include working-age adults, their children, and aging parents or grandparents.
- Grandfamilies: Households led by grandparents living with their grandchildren under 18.
- Two adult generations: Often consist of parents and their children, which can include adult children returning home.
- Four-generation households: Includes great-grandparents, grandparents, parents, and children. They’re increasingly common (and a bit crowded).
Navigating finances for a multi-generational family
Here are a few tips to navigate finances in a multi-generational family.
Understand your psychology
Understanding your “money scripts” is crucial, regardless of your living situation and especially in a multi generational family. These are the unconscious beliefs you hold about money that shape your financial behaviors and decisions.
What deep-seated ideas do you have about wealth, spending, or financial security? More importantly, where might these beliefs originate? Perhaps they stem from your upbringing, cultural background, or past experiences. By identifying and examining these underlying money scripts, you can gain valuable insights into your own financial mindset and potentially reshape it for the better.
This is unorthodox advice, but the best thing you could do is approach your family members to find out what their money scripts are. Note that it may be taboo to discuss money with your elders, let alone something more psychological like how they feel about money, so approach them with curiosity to help them open up. Encourage them to tell you stories about how they view money as an individual, or get them to talk about how their parents modeled financial behavior.
Understanding how everyone feels about money as individuals will help foster long-term harmony within the household and get all family members on the same page with managing finances.
In a recent episode of my podcast, I sat down with Elizabeth and Jonathan, a couple grappling with their spending habits. As we delved into their finances, an interesting pattern emerged around their grocery budget. At $920 per month, their food expenses were surprisingly high, especially considering they receive free meat from their in-laws.
[00:12:06] Ramit: Your debt payments are $1,265 a month. That’s a lot. We’re going to come back to that. We’ll just put a pin in that. Groceries are 920 a month. Explain that to me.
[00:12:17] Elizabeth: We came to this number based off of the amount of trips we took to Walmart or Target. It was actually very eye-opening for both of us how much that number was.
[00:12:27] Ramit: Especially because you mentioned that your in-laws provide meat for you, thing like that. That’s a huge savings.
[00:12:34] Jonathan: Yeah.
[00:12:34] Elizabeth: We overbuy because we both came from families that you buy what you can, when you can, when you have the money, and that goes for food as well. I like our cupboards to be completely stocked at all times. The moment I see–
[00:12:50] Ramit: Why?
[00:12:51] Elizabeth: Because I’ve come from not having, so I want them to be fully stocked so that I know where my next meal is coming from.
[00:13:08] Ramit: I think that’s pretty honest, and I can understand that if you were raised food insecure, not knowing where things are going to come, it’s a sense of comfort to open up a cupboard and see can after can, or a fridge full of vegetables or meat. I get it.
[00:13:23] Elizabeth: Mm-hmm.
[00:13:24] Ramit: Can I just give you a slightly different perspective?
[00:13:27] Elizabeth: Yeah.
[00:13:28] Ramit: Sure. I like to open up my fridge and see some food in there. That’s fine. I mostly eat the same meals every day. I’m not saying you have to. I’m just sharing what I do. I don’t really think about it. It’s easy. And when you said you like to see your cupboard full, I thought to myself, I like to see my portfolio full.
Elizabeth’s revelation about her need for fully stocked cupboards highlights how deeply our past can influence our present financial behaviors. While her desire for food security is understandable, it’s costing the couple nearly $1,000 a month – a significant sum that could be redirected towards their long-term financial goals.
Establish Financial Roles and Responsibilities
Having clear roles helps keep everyone aligned, and stops payments from being missed from situations where everyone thought ‘it wasn’t their job’. Assigning specific bill payments and bookkeeping duties helps keep things fair and efficient. Other examples to practice include:
- Make sure to assign responsibilities based on a person’s skills, availability, willingness to contribute, and ability to pay.
- Establishing a clear decision-making process for major financial choices that can impact the entire household. This is essential to maintain harmony and prevent conflicts down the line.
Normalize Family Financial Meetings
The notion of calling a family meeting might seem alien to you, but open and honest communication is key when managing finances in multi-generational households. Scheduling recurring meetings to discuss finances keeps everyone on the same page.
Of course, scheduling a meeting is one thing, making sure it’s productive is another. Consider setting some ground rules to keep things on track and respectful. Choosing a neutral ground will help, too – you might feel most comfortable in your bedroom. Chances are your family members don’t.
Smart money moves for multi-generational households
Here are a few practical tips you could use to maximize the finances in a multi-generational household:
Create a Household Budget Together
To effectively manage finances in a multi-generational household, it’s important to identify and categorize shared expenses, such as rent or mortgage payments, utilities, and groceries, as well as individual expenses like personal debts or discretionary spending.
Utilizing budgeting tools, apps, and strategies designed for collaborative expense tracking can make it easier for family members to contribute to and maintain a shared household budget.
Imagine a household where no one takes charge of the finances. No budgeting, no tracking of expenses, just a financial free-for-all. This was the reality for Michelle and Eric, a couple I spoke with on my podcast. Michelle had assumed Eric would manage their money, but he didn’t step up. The result? A perfect storm of financial insecurity and mounting frustration:
Michelle: [00:03:32] I don’t feel safe and secure with my financial life. Since COVID, we’ve actually started saving money. And we both put money in our IRA for two years in a row. But we live like we’re 25 years old. Just the whole thing about money is triggering. I was supposed to get married and have a husband who took care of me, who took care of my finances, who invested for us. I didn’t think I’d be 52 years old with very little savings, living like 25. When something happens it’s like, “Oh my God, how are we going to pay for that?”
Ramit Sethi: [00:04:14] Where did that story come from that that was how it was supposed to be? Where did you start telling yourself that story?
Michelle: [00:04:20] My parents helping me didn’t really help me
Ramit Sethi: [00:04:23] Tell me more about that.
Michelle: [00:04:25] Yeah, so they always helped me even when I moved away for a little bit. I lived in North Carolina and I wanted to get a one-bedroom apartment. My mom’s like, “Nope, you need a two-bedroom apartment.” So she paid for the two-bedroom apartment. She’s just always like, I wanted to go on a trip, mommy gave me money. I wanted this, mommy gave me money. So it was a pattern and why not? Mommy gave me money. I needed it. I wanted it. So I took it.
Ramit Sethi: [00:04:58] And looking back, what lessons do you think you took away from your parents always helping you?
Michelle: [00:05:06] Maybe gratitude and generosity, how people are generous with money and grateful for their financial support.
Ramit Sethi: [00:05:16] Anything else?
Michelle: [00:05:18] I don’t think it helped me grow up or be responsible with money. I never had to budget my whole life. I never knew anything about money. We never talked about it at my house either. It was my upbringing. I’m Jewish. So you marry a doctor, the doctor takes care of you. My dad took care of my mom. It’s generational, I think for us.
Ramit Sethi: [00:05:46] And when you were meeting Eric, did you have those conversations?
Michelle: [00:05:53] No, I don’t think so. It was a lot of assumptions. I don’t think we ever talked about money. I assumed we both grew up in the same town, we both grew up upper middle class. No, we’d never discussed money before we got married ever.
Ramit Sethi: [00:06:11] And how does money come up in your relationship?
Michelle: [00:06:15] It comes up with a lot of feelings and anger.
Ramit Sethi: [00:06:19] Oh, like what?
Michelle: [00:06:23] Like anger. I’m angry at him for not being responsible, for not taking care of me, for not talking about it, for not being involved in the savings or any bills, all of that.
The consequences of neglecting your finances can be just as impactful as the benefits of good budgeting. Without a financial game plan, you’re leaving your household vulnerable to unnecessary stress and conflict. These issues often stem from a lack of communication and basic number-crunching. By taking the time to have those important money conversations and crunch some numbers, you can avoid a lot of headaches down the road.
Boost Emergency Savings as a Household
The more people are in a household the more likely unanticipated costs become. Perhaps it’s paying for an unexpected healthcare bill, renovations to refurbish the house, or, maybe it’s a grandchild knocking over the TV you spent months saving for. Either way, it’s better to be prepared and here are a few ways how:
- Set a shared emergency savings goal for the household and assign every family member to contribute to that goal (where it’s reasonable). That way, all of you will be connected to a long term safety net for the family while at the same time ensuring you’ll be able to weather unexpected expenses or any income disruption.
- Automating contributions from each family member into a dedicated emergency fund can make the process of saving more efficient and less burdensome for individual contributors. You can use apps like Collectiv or HyperJar for this.
Don't Neglect Retirement Planning - IRAs for All Generations
It’s never too early, or too late, to start thinking about retirement savings. In a multi-generational household each family member needs to prioritize their own retirement savings, taking advantage of investment vehicles like Individual Retirement Accounts (IRAs).
Exploring options like spousal IRAs and inherited IRAs can help multi-generational families maximize their retirement savings potential and ensure a more secure financial future for all members.
You see, recent changes in tax laws have made it possible for IRAs to be passed down through multiple generations, enhancing their utility as a wealth transfer vehicle. Previously, IRAs typically shifted between two generations, such as from a parent to an adult child. However, a ruling by the IRS now permits beneficiaries to name their own beneficiaries, allowing a third generation to inherit the account, and potentially more. This concept, often referred to as a “stretch IRA,” allows the original account holder to designate a younger beneficiary, which can minimize required distributions and maximize tax-deferred growth over time.
Moreover, Roth IRAs are particularly advantageous for younger individuals. They can contribute to a Roth IRA regardless of age, provided they have earned income. This feature makes Roth IRAs appealing for younger generations, who can benefit from tax-free growth on their investments over time
Consider a Multigenerational Health Savings Account (HSA)
Health Savings Accounts (HSAs) offer several advantages for families with multiple generations living together. They can be used for the qualified medical expenses of spouses and tax dependents, which includes children, grandchildren, or elderly parents.
Let’s take the example of a four-generation household: in this case, a HSA could often help with three of those generations. Not taking advantage of one could be costing literally thousands so, in a nutshell, it’s something you should be looking into. Employees can name a beneficiary for their HSA, providing peace of mind that the funds will continue to belong to their family if they pass away.
Another option to consider is the dependent care FSA (DCFSA), which allows employees to access funds to pay for dependent care expenses for tax dependents like children or aging parents.
Take Advantage of Multi-Generation Tax Breaks
Living in a multi-generational household can offer significant tax benefits, particularly when it comes to claiming dependents or sharing tax credits and deductions. If your household includes dependents such as children, elderly parents, or other qualifying relatives, you may be able to claim them as dependents on your tax return.
Additionally, credits like the Child Tax Credit or the Earned Income Tax Credit may be available, further lowering the household’s overall tax liability. By pooling resources and ensuring that all eligible dependents are claimed, a multi-generational household can see substantial tax savings.
Got your attention? Well, caring for seniors in the household can provide further tax relief, particularly through deductions for medical expenses. If an elderly family member qualifies as a dependent and incurs significant medical costs, these expenses may be deductible. This could include costs for long-term care, medications, doctor visits, and other health-related services. For caregivers, these deductions can help offset the financial burden of providing for aging family members.
Non-financial benefits of a multi-generational family
Beyond finances, there are plenty of other pluses to living with a bigger family… even if they drive you crazy at times.
Stronger Family Bonds and Shared Cultural Heritage
Whether it’s a morning coffee or the chance to decompress after work, living in a multi-generational household allows family members to continually strengthen relationships. Daily interactions and shared experiences help preserve cultural traditions, values, and family history, fostering a sense of identity and belonging for younger generations.
Childcare and Eldercare Support Within the Home
Finding childcare can be a challenge sometimes, but it’s easier when your regular babysitter lives with you. In multi-generational households, grandparents and other family members can provide invaluable assistance with looking after children; it makes life easier and saves paying a childminder.
Likewise, adult children living with their aging parents can offer hands-on care, companionship, and support, helping to ensure that their loved ones’ physical, emotional, and social needs are met in a familiar and loving environment. Once again, this can cut costs drastically too as nursing care for the elderly tends to be costly, in which living with aging parents can lessen the financial load.
Shared Household Responsibilities and Chores
Task-sharing in a multi-generational household goes beyond just splitting financial responsibilities. While dividing household chores may not be everyone’s favorite activity, living with multiple generations can make these tasks more manageable. The old saying “a problem shared is a problem halved” rings true here.
You see, by distributing tasks according to each family member’s abilities, schedules, and preferences, chores can be done more efficiently without placing the burden on one person. Whether it’s cooking, cleaning, or yard work, having a clear division of responsibilities can ensure that the household runs smoothly.
It doesn’t stop there, either: collaborating on daily tasks and household projects not only keeps things organized, but also fosters stronger family connections. Working together encourages a sense of belonging and purpose, helping everyone feel valued and contributing to the household’s overall success. Tools such as chore apps or shared calendars can help manage tasks seamlessly. But if technology isn’t everyone’s cup of tea, a simple, old-school “chore board” in a common area works just as well. It keeps everyone on the same page and avoids petty squabbles over who does what.
Bonus Tip: Have monthly meetings with your family to talk about finances
I know monthly meetings to talk about money might sound strange, but hear me out. Money often becomes a source of stress for families when unexpected expenses arise. Whether it’s a sudden home repair or an unforeseen bill, these financial surprises can throw even the most carefully planned family budgets into disarray.
By having consistent monthly meetings with your family, you can take control of your finances and reduce stress. These meetings provide a structured opportunity to discuss your financial situation, plan for upcoming expenses, and work together towards your financial goals.
Who Should Be Involved?
The composition of your family financial meetings may vary depending on your specific situation:
- Start with the working adults: Initially, focus on including the primary income earners in the family. This ensures that those directly responsible for the family’s finances are aligned.
- Consider involving elders: If you have older family members whose input would be valuable or who are financially dependent on the family, consider including them in the discussions.
- Encourage children’s participation: Depending on their age, involving children in these meetings can be an excellent way to teach financial literacy and responsibility from an early age.
How to Get Started: The One Hour Monthly Money Meeting Guide
To help you kick off this new family tradition, I’ve created the One Hour Monthly Money Meeting Guide which you can use. While originally designed for couples, this guide can be easily adapted for broader family use. Here’s what the guide includes:
- A step-by-step approach to running your Monthly Money Meeting
- Learn how to structure your meeting for maximum efficiency and productivity.
- Word-for-word scripts and agendas
- Keep your meetings on track with pre-prepared talking points and discussion topics.
- Tips for handling challenging conversations about money
- Navigate difficult financial discussions with grace and understanding.
- Strategies for celebrating your financial wins together
- Build positive associations with financial planning by acknowledging your progress and successes.
Adapting the Guide for Your Family
If you’re a working adult in your family, you can use this guide as a starting point for financial discussions with your spouse. For families with more than two adults involved in financial decisions, feel free to modify the guide to suit your specific needs. The key is to create a monthly meeting format that works for your unique family dynamic. As you have more consistent meetings, expect to tweak your meetings accordingly as you learn new things.
Benefits of Regular Family Financial Meetings
By implementing monthly financial meetings, you can expect to see several positive outcomes:
- Improved financial awareness & communication: Everyone in the family gains a clearer understanding of your financial situation. These meetings also provide a dedicated time to discuss money matters openly and honestly.
- Better planning: Regular discussions allow you to anticipate and prepare for future expenses.
- Reduced stress: Many people grew up with negative money scripts because their parents/family didn’t model what good money management looked like. By addressing financial matters proactively, you can minimize the anxiety associated with money issues for yourself and your family members.
- Financial education: For families with children, these meetings serve as invaluable learning opportunities about budgeting, saving, and financial responsibility.
Remember, the goal of these meetings is not to create tension or assign blame, but to work together as a family towards financial stability and success. With open communication and regular check-ins, you can transform your family’s relationship with money and build a more secure financial future together.
