Financial Issues and Concerns
One of the top reasons that most families give for merging households is economic pressure and an inability to afford more than one household. This situation is compounded if families are suddenly faced with an additional setback such as a divorce or a family member getting ill, losing a job or becoming unable to care for him or herself. Moving in with other family members can be a way to combine or pool incomes to help pay fixed and variable expenses including mortgage or rent payment, utilities, property tax, groceries and more.
Together you will need to create a workable plan to help meet the financial and life goals that you have both for yourself individually and for your entire family. Whether you have already merged households or are just beginning to consider it as a possibility to help meet family and financial needs, it’s important to frankly discuss and agree on how you will handle important financial issues such as:
- How will you handle household expenses? For example, will you all contribute an equal portion to bills, will you each pay what you can or will you each take responsibility for certain bills? Do you have a household budget? Since different members of the household may have different resources and different needs and preferences, how will you decide on levels of discretionary spending particularly related to services such as internet and cable, cell phone bills, etc?
- The general rule of thumb is that every household have an emergency savings with enough money set aside to be able to pay 3-6 months of expenses. Do both families or either family have any emergency savings? How much and how far will that current savings go given anticipated monthly expenses? How will you share responsibility for contributing to the fund on a regular basis to boost savings? This is especially important in households with a lot of dependants who either can’t or don’t work and who are depending on a few wage earners.
- How will each family member manage his or her banking needs? Will everyone have their own individual bank accounts or will you share or co-sign some accounts or a combination of both?
- If the family is going to help share child care responsibilities, is there the expectation that you will pay one another to help? If it’s necessary to find outside child care help, who will pay for that?
- If the living arrangement is to help a family member save enough money to move out, what are the expectations for how that individual will save? Will other family members contribute to that person’s savings goal? How will that affect/impact the person’s ability to help pay for household expenses? If someone can’t pay now, but gets a job, is there an expectation or agreement on how much that person will pay back to the household?
Even though you are pooling your multigenerational family’s resources, you will need to establish some rules that outline how each member will contribute to the family’s income and how ongoing expenses will be paid.
Also, such an arrangement does not mean that household members should ignore saving and investing needs and goals. Since you may have combined households due to financial strains, or temporary or long-term setbacks in the life of a family member, it becomes even more important to think about ways to create needed long-term financial stability. Depending on your individual and joint financial needs, you may want to meet with a professional financial advisor and/or lawyer to discuss your unique situation and to learn what financial and/or legal steps to take to best save and invest for your future and protect your existing assets.
Similarly, living in a multigenerational household now does not automatically ensure that you'll have the help of other family members when it comes to your retirement. Your family structure and living situation may change and you may have less support and less combined financial resources. Or, you may remain living with immediate and extended family but there may be more financial pressures and needs within the family. Or you may have additional retirement goals or needs (i.e. medical care) that aren't sustainable based on your family's assets. It is important that you create and work toward your own individual retirement goals and not assume that others will be able to help financially support you during retirement. Learn more about how to create a retirement savings and investment plan.