Sharing is caring; we all know about it. In other words, to share is to give something to someone, which is equal to taking care of the person. But, that’s not always true. For instance, sharing financial and personal information with others is unnecessary and detrimental. Sharing information like passwords is strictly prohibited. However, there are exceptions here as well. Essentially, we need to judge the need by the information and then decide whether sharing is mandatory, recommended, or a no go. We will delve into the subject at length and understand is sharing money secrets a good habit?
People often keep money secrets, and they are possessive about it. Ideally, both spouses must be in the loop on all the financial information and participate in financial decisions. But, quite often, that is not the reality. Further, in the case of larger or joint families, people beyond the spouse may also need to be involved in financial decision making. That, too, is often not the case.
In other words, the idea is to explore the possibilities of sharing financial information for a better tomorrow. The focus is on money-related secrets and information pertaining to financial situation of the family.
Three golden rules – know the rights, show interest and participate
Before exploring the topic further, firstly, it is crucial to understand the rights in money matter. For instance, a wife has a legal right to demand a basic level of comfort and amenities from the husband. These benefits are mandatorily available and a start point on the financial journey, to be taken together. Modern day female partners are well educated and aware of financial aspects, rights and obligations. However, we still believe it is important to emphasize this point that partners must know their individual rights.
Secondly, investing time in family finances is a joint responsibility. Both the spouses must make efforts to participate in the financial journey as one body. This is largely about future financial planning and making the strategy.
Thirdly, both partners must take an active part in conducting financial transactions (day to day). In other words, spouses must try to split the roles based on their expertise. The one who is good at making investments can do so. The other spouse can take charge of managing the expense budgets. One can negotiate existing outflows, while the other can take up the responsibility of checking alternative suppliers (online/offline, etc.). The split must follow skills, but a division of financial duties is helpful. All the financial information gets easily distributed in those ways and remains commonly available.
Finally, this method ensures both spouses (or close family members) know the factual financial situation and work together in this journey. The process by design builds mutual trust and belief in each others skills – one spouse gets an assurance that the other one can deal with money matters and can manage the financial information.
Why the need to work together?
Research shows that approximately half of the partners do not disclose credit card debt to their spouses.
One in every four keeps financial secrets and is not fully transparent with the significant other.
Why is sharing information so important?
Here we would like to start with a story and then come to the point.
A friend’s father passed away some time back. He faced a terrible situation where lots of physical share certificates from the late 1970s, 1980s and 1990s were lying in files in various lockers. The struggle began from identifying his father’s total bank accounts and vaults. That friend ran from pillar to post to convert the shares into dematerialized form. In some cases, the owner of shares is friends and relatives. Few of them are not even traceable today.
His father was an early investor and believed in the long-term story of the equity asset class. Still, the vision got lost and now what his son (my friend) remembers is the pain of the subsequent process. Remember to read about the importance and essentials of a valid will in India. I am sure you too have had similar instance amongst your relatives. The story is not unheard of, as keeping financial secrets is deeply common. More disappointing is that people do not want to learn from mistakes and evolve their mindset.
We know that the world has different types of people – some are good, a few are evil, and the rest do not bother. There have been instances where cunning relatives fool the surviving spouses of their own money.
In case of the sudden demise of a primary member, the surviving spouse has no idea of inheritance or inherited assets. In such circumstances, the person relies on guidance from the near ones. Relatives provide the right kind of help, but sometimes they are not aware. In some cases, although rarely, relatives may also have evil intentions. Such sinful people take advantage of the situation for their benefit and devoid the actual beneficiaries of their own money.
Sharing money is different from sharing goals
Focus on the big picture and decide the way forward. One option is to have a shared pool of money and, therefore, shared goals. That means growing together as a family. Another option is to keep money separate, but goals in common, and each one contributes to the family objectives.
In the former case, the money in common and the practice is prevalent in single earning houses. Further, does it mean that members do not talk about money in the latter case? No. That approach essentially means chalking out common goals but still retaining the independence to work towards those goals. Each person has the freedom to take an independent decision and how to contribute towards family objectives. This approach allows necessary freedom and imposes an obligation to contribute in common, both simultaneously. Either way, it pushes the family members to come together and discuss their financial needs and goals.
Is sharing money secrets a good habit?
First, you should remain highly mindful of who should know about the family’s financials. In other words, selecting people to discuss this topic is genuinely critical. However, it is not that difficult, and you would often know the right set of people for such discussions.
Second, remove the taboo around discussing your salary or business income. Your close family deserve to know about it. Share the investment you made or the loan you took. Disclose the insurance the family has. Talk about the total expenses – though, making family budgets is out of fashion, but it had its merits. Include these topics as a part of everyday conversation. You do not have to talk daily about it. As long as the people who should know about these know it, it is enough and purpose achieved.
Have money talk, and discuss topics like:
- What is the total debt
- The total amount of savings in cash, bank and shares
- Are there any retirement savings plan?
- Life and medical insurances
- Recent spending trends
- Feelings about money and long-term future
- Any money stress
Always remember, transparency is the key. One should always be honest, and the rest will follow.
Try to understand and appreciate the other side of the story. Focus on the motive of any suggestion before deciding the fate of the other idea. For example, your spouse or other family member has a different opinion. Learn more about that view, appreciate the contribution and evaluate objectively. Who knows, you may like the idea better than your own.
Third, include your children in this process, and summarize the situation for them. Of course, they cannot understand all the details, but they should know the state of affairs. The young generation is more intelligent than we think, and they will comprehend the situation faster than one would expect. For example, tell them about the amount you would like to spend on their birthday for their party and gift. Let them decide the allocation. Or, share your idea and seek inputs if the amount needs reallocation. Please give them the liberty and allow them space to think about how they would like to spend the money. Take their suggestions seriously. There is no better way for your child to learn first-hand about finance and make financial decisions.
Finally, make savings and investment decisions joint family goals. In other words, always remember that savings and investment outcomes are not just your prerogative. The idea is for the family to grow and benefit. The more participative the approach is, the better is the outcome. For instance, if you want to invest in a property, take votes from all and jointly debate the options before deciding. You will often come up with better outcomes when you take joint decisions.
The bottom line about sharing money secrets
Fostering a transparent money culture is a joint responsibility but starts with you. The value for money, valuing experiences more than objects, emotional intelligence around money develops with age.
The more conducive the environment, the easier it would be to share relevant information amongst the family members. It also becomes easier for them to appreciate the information you share.
Financial secrecy can be detrimental to family bonding, especially when more than one earning member exists. Further, one partner’s behaviour influences the behaviour of the others, which creates a loop. If any member is secretive, the others follow that path. It is easy to walk in silos until you face a grave, non-manageable situation.
Involving family members may not be easy, especially if there is little financial prudence in the family. But, not involving family will have far more adverse consequences. So, in conclusion, involving the family in financial decisions and money related discussions is essential.
About the author
The author is a senior finance professional with over fifteen years of work experience in corporate finance. He has an affinity for matters relating to personal finance and investment management. The author wants to share his knowledge and understanding of the subject through his writing.
The author has used his knowledge, experience, and understanding of the subject and has exercised extreme caution to avoid possible mistakes. However, the author does not take responsibility for any error that exists.
The article’s views, opinions, and thoughts belong solely to the author and not necessarily to the author’s employer (past or current), organization, committee, or other group or individual.
Under any circumstances, the author shall not be liable for any views or analysis expressed in this note. Further, the opinions expressed are not binding on any authority or Court. We advise readers to consult their financial advisor for assistance in their specific case.