Joint finances in Family

In olden times when the earnings were low and basic necessities were expensive managing finances were easy. Everybody pooled all their money and still there was not enough to keep everyone warm, fed & clothed. You may call times to be hard, yet everyone seemed happier.

Today it takes just 25/- to buy a loaf of bread and take credit to be a breadwinner. The share of food & basic necessities (housing purchase excluded) has gone down each year in spite of the complaints of the rising prices. Yet almost nobody has sufficient money and nuclear families are mushrooming primarily for misalignment of social & financial priorities.

Furthermore a family finances is a complex tussle between means, wants and priorities. Add to it retirement planning, mortgage, car purchase, investments and even the most seasoned financial analyst will not be able to give you an answer. In fact I have seen fights over finances in Double income no kids/dependent family as well.

Typical issues faced by joint families or nuclear family with two bread winners are:

  1. Delayed gratification: How much to spend and how much to save.
  2. Alignment of goals & priorities
  3. Saving enough for Separation/transfer/relocation
  4. Share for large ticket purchases (Car, house, investments, abroad vacation etc.)
  5. The financial means & needs of each member in the households changes over time. But expectations & obligations are often not adjusted because of culture or habit.

Commonly households with multiple breadwinners manage their finances in the following ways:

Sr no Method Pros Cons
1 Pooling: everybody pitches in equally and make the head of the family responsible for all finances Simplest measure, practiced across ages Breadwinner & decision makers are sometimes different
2 Fixed contribution by each bread winner Gives each breadwinner some discretionary funds to fulfill their needs If contribution is too low or too high then there will be misalignment of funds
3 Pay what you can: each member takes care of a certain expenses It is division of chores extended to payments as well Basket of chores needs to be re-aligned periodically
4 Generation based roles: pensions & family estate to take care of daily needs, and younger generation to care take of luxury, entertainment & savings Keeps the tussle between investments & luxury to minimum Essentially the younger generation is free loading on the elders

 

I have realized is that money is important, but it is not everything. As long as the individual members realize that the joint family has the support system needed for emotional & economic well-being then the system will work fine. There are no magic formulae and each family is different. One needs to develop co-dependency and value the kingship of your extended family everything works fine. In fact you get the economies of scale with living together, the kids are better groomed and the support system well established.

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2 thoughts on “Joint finances in Family

  1. @ prax. yups … and thanks for dropping by after so long.
    “All happy families are alike; each unhappy family is unhappy in its own way.” ― Leo Tolstoy,

    What I am realizing is that even double income nuclear families have issues with financial planning

    Like

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