Joint family finances: minefield of embedded emotional bombs

It’s been just over five months since I began doing a weekly personal finance show on Bloomberg India TV. Called Smart Money, the show is about offering strategies to people who are looking for hands-free money management. It’s for people who want to put in place a grid that they can service while they deal with flooding roads, politics at work, kiddy tantrums at home and that darn neighbour who parks in your place just to irritate you. The battle of everyday life of urban middle-class India leaves little time for goals such as everyday workouts and financial planning. The show seems to be helping for we get more than 25 to 30 mails (other than tweets and SMSes) a week sharing detailed financial information and asking for a strategy.

And as I hear their stories, I understand the lives and concerns of middle-class India just a bit more. For instance, I figure that India has some smart 30-somethings who are truly financially fit. Also that a majority of the people who mail have parents listed as dependants living with them. Read the general newspapers and listen to the stories swapped socially and one would think that the exact reverse was going on—that kids were abandoning parents and were all moving to the Gurgaon condos to live the high life. But middle-class India lives in the family and while urbanization, work and the new-found desire for “own space” has caused many families to branch out into independent living units, the overall responsibility for ageing people stays with their children, all of whom seem to be doing the right things—if the mails we get on the show are any indication. When I read behind the information that comes as financial details and questions, I see two distinct trends. One is the pragmatic newly emerged head of the household who is happy to look after ageing parents and other members of the extended family (unmarried siblings, in-laws and other wonderful assorted members of the clan), but will do so keeping the needs of his own nuclear family in mind. The financial lines are clean and the segregation of funds clear between the two parts of the family. This person will put on his oxygen mask first before helping the others. And then there are families in which the emotional blackmail and power struggles shows through the way the finances run. Among other things, it shows up in a disproportionate burden on one member of the family despite other members earning a regular income.

Nuclear family finances are tough enough to crack, but try unravelling joint family finances! The landscape is embedded with emotional minefields and the chances that this column will blow up in my face are very high. But then that’s never stopped me. So, I’ve made some very general ground rules for dealing with extended families living together. First, there are no secrets in a family that lives together. No secret life, no secret money sources or investments. The incomes of all parts of the family must be disclosed and a pro-rata household expense share decided on the basis of income. Of course, sometimes the pensions or salaries are so small that it works more like pocket money rather than any contribution to the household. Whatever the numbers, there must be a conversation about what is coming in and what is the monthly household spending. Two, investments out of the current income of the principal bread-winner must be made jointly in the names of the spouse. Three, work-related expenses of all members come out of their incomes and not the common pool of household spending. Multi-level marketing (MLM) firms have perfected the art of feeding off a running household to hide business costs of travel, communication and entertainment. Apportion costs if you have an MLM-hypnotized family member. Four, details of bank accounts, lockers, insurances, paperwork of investments and wills must be shared with the household. Five, getting supplementary credit or debit cards is a bad idea for a relative if you are hesitant in talking about how they use that card. We all live in families where a lot of things cannot be said—but draw the money lines clearly on the ground or else it will just add to the baggage that families carry around.

End Note: I was talking to an old lawyer friend who just had this one comment to make: “I can handle complicated corporate cases, but those that involve an extended family are just the toughest. Most of the time the fight is not about money, it is totally non-monetary issues. Who said what to who (and how it was said) 15 years ago seems to matter more to them than how the joint family assets are going to be carved up!” The sooner we can understand that money is just the manifestation of the simmering emotions, fears and greed, the closer we are to understanding our own money lives.

Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor, Mint Money, and Yale World Fellow 2011. She can be reached at expenseaccount@livemint.com