A practical guide to ensuring your family’s financial well-being

To achieve financial well-being, myLIFE regularly reminds us of how important it is to sort between our needs and desires, without letting ourselves be influenced by other people’s plans. Financial well-being is, before anything else, a personal process. If you live with your family, however, then the exercise can be more complicated. Mutual understanding is essential. Here are a few tips to help you draw up a budget that promotes the financial well-being of the whole family.

What is financial well-being?

There is no universal definition of financial well-being. A rough summary would be something like “the ability to manage day-to-day finances, absorb financial shocks, achieve financial goals and enjoy financial freedom”.

Financial well-being is not just about objective financial factors such as income or savings, but also subjective perceptions, our financial knowledge, our attitude towards money and even our environment. Subjective factors sometimes weigh more heavily than objective criteria on an individual’s assessment of their own financial well-being – and these subjective perceptions will evolve as we age and the focus of our attention shifts. What we consider to be important for our financial well-being is fluid, not frozen in place.

While the issue of financial well-being is difficult enough to manage as an individual, it becomes particularly complex when it involves a family that intends to manage its budget collectively. Cross-generational tensions can arise if we don’t take the time to talk to one another, understand what’s important to each of us and make compromises accordingly. At the family level, the financial well-being of each individual can only be achieved if everyone steps up to the plate.

Between a young adult seeking financial independence, a middle-aged parent juggling work and family commitments, and a pensioner concerned about financial security, a good financial plan must take into account each person’s needs while pursuing common goals.

Reconciling freedom, security and independence

In the Western world, there is a tendency towards rugged individualism. Very often, you’ll find that each person manages their own finances without worrying too much about the rest of the family. Having said this, successive economic crises have also led to more and more families pulling together to help each other maintain some form of financial well-being. And that entails a varying degree of collective planning.

The first step to managing a family budget effectively is acknowledging that financial well-being means different things to different generations.

The first step to managing a family budget effectively is acknowledging and taking into account the fact that financial well-being means different things to different generations. The aspects of financial well-being that take precedence vary greatly by age group:

• • Teenagers and young adults in the family value the financial freedom that enables them to live in the here and now above all else.
  • Middle-aged adults (often parents) value collective security above all else. They generally focus on supporting their children and maintaining their current lifestyle. For them, financial well-being is all about meeting the family’s immediate needs, managing debts and saving for long-term goals such as their children’s education.
  • Senior members of the family are mainly concerned about maintaining their financial independence. Their biggest fear is becoming a burden on others.

Between parents who are mainly concerned about the security of others, young people who dream of financial independence, and older people who fear a loss of financial autonomy, a cross-generational discussion about financial well-being can quickly lead to tension and misunderstanding at the dinner table. But don’t panic! Drawing up a joint financial plan that recognises individual needs while working towards shared financial goals is not an impossible task – far from it.

Learning to listen in order to work together and plan better

Let’s take an ordinary family. Kevin, the young adult in the family, has just started his journey into the working world and isn’t thinking about saving for the future. He spends most of his income following a similar lifestyle to his friends, with no thought given to long-term financial planning. His parents, who still have his two younger sisters to support, are concentrating all their resources on bringing up their children and funding their higher education, completely neglecting to prepare financially for their retirement. John, the widowed maternal grandfather, is an old-school kind of guy and doesn’t like discussing money matters with his daughter. He’s keeping his fears about the cost of his healthcare under wraps as his financial reserves slowly but surely dwindle.

As you can see from this example, although everyone is preoccupied with their own legitimate concerns, it’s clear that they would all benefit greatly from a joint discussion. Between the short-term stability sought by some and the long-term security desired by others, a balance can be struck that leads to a good plan being drawn up and makes individual and collective financial well-being possible.

In practical terms, this means learning to listen to your family members and not just putting your own priorities first. This isn’t about being altruistic; rather, it’s a key ingredient for success. Why? Because mistakes can be made when you’re too focused on your own priorities.

• • Teenagers and young adults need to understand the importance of saving early, and we’re not just talking about putting aside part of their income for short-term goals (emergencies, travel, etc.), but also investing with the long term in mind (retirement or setting up a business).
  • Parents need to focus on building up a solid pension fund, managing debts and possibly saving for their children’s education. It may be worth encouraging them to automate the process of saving and investing in order to guarantee regular contributions to their objectives.
  • Senior citizens need to ensure that they have sufficient savings with regards to their long-term care or that they have a plan in place to take out long-term care insurance. Putting money aside for particular future needs, such as funeral expenses or estate planning, can provide peace of mind and reduce the financial burden on other family members.

Freedom, security and independence: the three elements that constitute financial well-being are not irreconcilable, as long as they are addressed within a climate of confidence – which means having a certain level of financial education.

Freedom, security and independence: the three elements that constitute financial well-being are not irreconcilable, as long as they are addressed within a climate of confidence – which means having a certain level of financial education.

Fostering confidence and financial knowledge

To achieve a sense of financial well-being, you need to be confident in your ability to manage your finances. Lack of financial knowledge or the prevalence of cognitive biases can prove a hindrance at any age. You have to learn to recognise these issues in order to be able to avoid them more effectively; otherwise, the consequences can be serious.

• • Kevin, the young adult in the family, could be seduced by the promises of easy money peddled by certain online influencers, resulting in him investing in financial products that are poorly understood, without having read up on the principles of risk management.
  • His father, convinced that he has sufficiently mastered the principles of personal finance, has dispensed with the services of a financial adviser. In doing so, he is depriving himself of any products or services – and their corresponding tax benefits – he might be unaware of.
  • The grandfather, meanwhile, is left to realise – somewhat belatedly – that he can still better secure his current situation and eliminate any fear of becoming financially dependent in the future.

In order to avoid these situations – which can cause a great deal of frustration and a lack of confidence when it comes to finances – it is in the interests of all family members to improve their financial knowledge. That’s where a platform like myLIFE comes in. Young adults need to be clued up on the basics when it comes to investing, budgeting and the risks associated with financial products. Parents like Kevin’s should not hesitate to talk to their financial adviser to find out more about the solutions available to them in relation to their life goals (financing retirement, buying a house or making preparations to fund higher education for the other children in the family). As for the senior members of the family, they need to be better informed about how to make the most of their retirement and build financial security to cover things like medical expenses or long-term care costs.

A holistic approach to family welfare

Financial well-being is about more than just money and objective elements. It also covers the ability to align financial decisions with a family’s values and aspirations. Freedom, security and independence: these are the values that constitute financial well-being, and it is normal for different generations to weigh up the importance of each of these values differently. But they are not incompatible. The key to achieving collective financial well-being is to adopt a holistic approach, taking into account both the objective facts and the subjective aspirations of each family member.

Ensuring a family’s financial well-being means acknowledging the specific financial goals of each family member and working on a joint plan. By focusing on savings, encouraging financial education and aligning short- and long-term financial goals, families can create a budget that supports both individual aspirations and collective security. Ultimately, a successful family budget is one that balances flexibility with stability, ensuring that each generation can live well today while building towards a common future that is both prosperous and secure. The first step in this regard is to take the time to talk to each other openly.