Families, these days, come in all shapes and sizes: traditional young couples just getting started; middle-age couples getting started again; single-parent families; and because of difficult economic times, families now include grandparents, couples and grown children living together. Traditional advice on family investing just doesn't take into account changes in the family dynamic over the past decade.
If you haven't made a written plan on how you are going to combine your incomes, do that before you start a financial plan. If one has better credit than the other, consider keeping separate finances and contribute to a family bank account, savings account, college fund and other expenses you pay jointly. Consult a tax attorney to determine the best structure for your finances. Some couples put a mortgage in the name of one spouse and the deed to the house in the names of both spouses and some have both spouses on the mortgage and only one spouse on the deed. These are important considerations as you start life together and should be handled on an individual basis by professional advisers.
Single parents have special financial needs, not the least of which is how to save for college and retirement on a single income. One of the biggest hurdles to overcome is your own pride. Often, single parents allow child support payments to go uncollected and overlook contributions from grandparents, aunts and uncles on the former spouse's side of the family. Set up a college fund and let it be known that birthday and holiday presents should be given to children in the form of cash investments in their college funds. Your immediate obligation is to provide a safe and secure home environment for your children and yourself, plus a retirement fund for yourself so you don't become a burden on your children. Create separate legal entities for these accounts with the help of a trust attorney because you may re-marry and add to your family. Mixing family finances in a situation of plenty may not be a problem but penalizing one set of children for the difficulties faced by the other set of children is something that should be decided at the time of need and include the wishes of your children.
Teach your children about the realities of financial obligations early, by including them in appropriate discussions of family finances. Many experts now agree that providing a child with an allowance that must be used to purchase toys, video games, trips to the mall with friends and other personal wants is a good way to develop money management skills. One allowance system is to give them three containers for college savings, major purchase savings and incidental expenses. Their responsibility is to divide their allowance into 3 parts — one for each category. As these funds accumulate, open bank accounts and investment accounts for them, but oversee their decisions. Credit cards for children are a new problem for parents. One sensible view is to allow a debit card on the child's checking account. This gives a child experience in using a card to pay for purchases without adding to your own credit burden. From the start, some children are savers and others are spenders. Watching their habits for signs of their money-management characters is a good way to head-off potential problems for them in adult life.
Finances become complicated when other family members move in with you, either to help you or because they need help. Lifestyles and customs are changing because of changes in the economy so it is a good idea to plan for each eventuality you can foresee and decide how to set up arrangements prior to the situation arising. If you are taking in relatives or friends, create a written agreement regarding how finances are to be handled. Include rent, utilities, food costs, transportation expense and general property upkeep. If one person pays for a new appliance or piece of furniture, decide on the date of purchase who owns the item and who is responsible for its maintenance. If the living arrangement changes as people move out, these written agreements may prove to be important in avoiding fights and legal battles.
Victoria Duff specializes in entrepreneurial subjects, drawing on her experience as an acclaimed start-up facilitator, venture catalyst and investor relations manager. Since 1995 she has written many articles for e-zines and was a regular columnist for "Digital Coast Reporter" and "Developments Magazine." She holds a Bachelor of Arts in public administration from the University of California at Berkeley.