Many households around the nation are now multigenerational. This was not always the case.
The standard American household was once envisioned as a small unit. The so-called American dream proliferated this ideal. To be successful was to own your own home with your small family unit. This unit was generally composed of parents and their children. Nothing more, nothing less.
But times have changed. As the United States has evolved, so have family dynamics. America has grown ever-more diverse. Aspects from other cultures are influencing family dynamics, as are changing values.
Households around the nation are becoming increasingly multigenerational. Grandparents, parents, children, and other extended family are starting to see benefits in living together. A more cohesive and supported family unit is one of the most cited.
Another reason more homes are multigenerational is because of budgetary concerns. Whether it be because it's too costly for grandparents to live alone and support themselves or because of other financial reasons, the multigenerational family is one with budget always on mind. Parents find themselves providing for both their children and their own parents. This can cause a lot of stress.
As more of the population shifts to multigenerational households it is important to establish sound financial principles in case you find yourself in such a situation.
Clarity before action
The multigenerational household is being warmly embraced. Adult ‘kids' are moving-in with their parents, grandparents are living with their children to help with childcare, and family dynamics are constantly evolving. If you ever find yourself considering a multigenerational household, one of the most important budgeting tips is being forthright about the situation with all involved.
Take the time to sit down and talk with all that will live in the house. Lay out the financial needs and considerations of all, and address how each will contribute to the overall budget. Be clear about who is paying for what. Approaching this family dynamic with a plan in place is critical to future success and happiness.
Cover your needs first
Your primary financial responsibility should be to you and your partner. This may be hard for the altruistically motivated to realize, but if you don't take your budgetary needs into consideration first, you create a risky situation that may be prone to collapse. You want the best for those you love. This starts with taking care of yourself first and then helping others.
Utilize all in-house resources
A multigenerational household is one of diverse talents. Recognize such. Rather than immediately hiring a contractor, babysitter, or outside provider for any situation, see if anybody in the household can perform the work for free. Chances are you'll be able to save money by utilizing in-house resources. Even if this means having the grandparents watch your children instead of sending them to daycare or hiring a babysitter, any savings are better than no savings.
Build Financial Futures
One of the reasons multigenerational households are becoming more popular is because of savings associated with living costs. Use this savings to your advantage. Attack what debt you have out there, invest strategically in savings and retirement, and don't spend luxuriously until all are comfortable with their financial futures.
Be Transparent with Expenses
Unanticipated financial events are no fun. Many see them as the same as surprise expenses. And while some surprise expenses are unanticipated, you can reduce the shock of many expenses by being transparent with all bills out there. This applies to everybody in your multigenerational household.
Create a culture of openness. This makes all feel comfortable sharing their financial situations and obligations. That way you can strategically assess finances and ensure a healthier future.
Consider Freeing Up More Funds
When your multigenerational household first starts you may need a little more cash flow. For this you can look towards a range of solutions. From Social Security to home equity and mortgages, consider all options to help with your initial budget needs. When you feel comfortable with where you are you can always pay back and adjust.
Plan for the Future
Create a vision for your household, both personally and financially. Ask yourself and your family members questions. How long do you plan to live together? Are there are concerns? Will some members contribute more than others? Is there the potential the household will grow in the near future?
By planning ahead you put you and your family in better position for financial success.
Be Open and Honest
If there is somebody in the house who isn't picking up their slack you need to be forward in addressing it. Ask them what is going on and make sure they are being transparent with their financial situation. Even though it may be a tough conversation to have, it is critical in ensuring a more positive outlook. By confronting any issue you relieve emotional and financial stress.
Review the Situation Semi-Annually
Your multigenerational household needs to have semi-annual meetings. These are to address and assess personal and financial matters. Have a spreadsheet or document where you track the budget since the previous meeting so you can look at expenses vs. income and see who contributes what. This will help you adapt your strategy and keep all members in the know.
With the rise of this new family dynamic come new financial responsibilities and circumstances. If your family finds yourself considering a multigenerational household approach, make sure you are transparent in all financial facets. Know who is responsible for what, what they bring to the table, and have a plan in place for the future.
Having a budget and financial plan in place for your multigenerational household is crucial. The above tips will not only help you establish sound financial practices but will do so while allowing your family to focus on what matters most.