Having money means being able to share it with the people you love. But that doesn’t always mean that it’s OK to mix money and family. In fact, many people find that mixing money and family can be stressful, complicated and even cause undue strain on familial and marital relationships.
We know that money is the leading cause of stress in relationships, with almost half of those ages 44 to 54 who are in a relationship reporting that money is the cause of the major stress they’re enduring.
Money problems can cause strains on more than just marital relationships.
1. Financial Mistakes You Don’t Want to Make
Creating healthy monetary habits within a family starts with knowing what not to do. Here are some of the key mistakes to avoid:
Hiding money or purchases from loved ones. According to one survey, one in five Americans have made a purchase of $500 or greater and failed to tell a loved one about it. This lack of candor can lead to more money mistakes down the road to cover up the initial secret.
Welching on obligations. An unpaid loan or debt can be a significant source of strain—on both ends. The debtors can feel like they aren’t capable of interacting in the usual way because of the pressure on them to repay the debt. The lenders can feel forced to put pressure on the debtors if they need the money back for their own obligations. Making large loans to family members can be stressful for everyone involved when not handled the right way.
Creating familial privileges. Even if you have enough money—say, to run your own business—it can be a mistake to overly indulge those around you. For example, hiring a family member and not expecting them to hold themselves to the same standards of any employee can create resentment among those who earned their way into your trust. Don’t create artificial familial privileges on a professional level where they shouldn’t exist.
2. How to Avoid Mistakes of Mixing Money and Family
Avoiding these mistakes can be as simple as knowing them and never letting them occur. But sometimes, circumstances can require mixing money and family to a slight degree. It helps to be prepared with the right habits:
Open communication is key. For example, if you must make a loan, make sure to set the terms of the loan in writing before exchanging money. When you hire a family member, make it clear from the get-go what they’ll be expected to do. Without ever communicating these things, there’s too much leeway for mistakes. Open communication helps prevent that.
Give yourself an out. Don’t ever feel pressured into making unwise financial decisions simply because a family member asks it of you. You don’t have to co-sign for a loan when you know you’re not capable of paying it back. It doesn’t make you unkind to watch out for your own bank account. Just be direct and honest with whoever is making the request.
3. Credit Cards Can Be a Blessing and a Curse
Many people view family and money mistakes as easy to avoid—but then turn around and make the same mistakes with a credit card. A recent account in Glamour highlighted the mistake of opening a credit card with a family member—in this case, the author’s father.
Having someone else pay the bills seems like a great way to avoid stress, but in the long run, the situation put undue pressure on both of them. Without a set limit on spending, the credit card became more of an issue than a blessing.
This, of course, doesn't mean you should completely avoid opening credit card accounts with family members. It just means that you should do so with extra caution. Adding authorized users to your account can help boost rewards earnings, and even score you extra bonuses in certain cases. However, without the open communication discussed above, earning those extra points and miles can easily devolve into a pyrrhic victory.
Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.
© 2021 Newsmax Finance. All rights reserved.