If you don’t want money issues to come between you and your family, it’s important to prepare yourself for them ahead of time. We’ll run through the primary ways money causes problems in families, along with strategies to ensure it never becomes an issue in your family.

Why money matters to families 

You might think that something as seemingly shallow as money wouldn’t affect you and your family. But you’d be surprised. Money can spark strong emotional reactions, especially when families are dealing with an abundance or shortage of money. And when you factor in the number of people in the family and consider potential conflicts of interest, it’s no wonder it often causes division.

Healthy communication about money can stop resentments and misunderstandings from brewing below the surface. In cases where family members are reluctant to compromise or communicate, special care should be taken.

With that in mind, let’s run through the main issues people encounter (inheritance, parenting, and aging relatives), before giving you some tips to avoid division.

Parenting 

How and when to teach children about money is a common concern of parents, according to Cara Gardenswartz, PhD, a psychologist with Group Therapy LA. 

Gardenswartz recommends giving young children a small but consistent allowance so they can learn the fundamentals of saving and spending on their own, with some light guidance from parents. Once children enter high-school ages, it’s good to have them balance their budget, which will give them the skills to transition to budgeting in college. 

“Give children a debit card and check usage, making sure spending is pre-approved and monitored,” Gardenswartz says. “This builds trust between the parent and child regarding money, and children will be better off later in life due to this teaching.” 

It’s important for parents to be mindful that problems can arise when one child is treated differently than the other, even if it’s for good reason. 

“Common drivers of tension are sibling rivalries,” says Robert Selsor, a fiduciary litigator at Kirkland Woods & Martinsen. “A golden child might get more [money or financial support] in childhood, which can cause problems and lead to resentment later.”

Healthy families understand that everything can be discussed, Gardenswartz notes, and that no topic, whether related to finance or not, needs to come with shame. 

“Avoiding open discussion can lead to denial and other issues,” she says.

Indeed, poor financial literacy can make a child more likely to rack up debt later in life. Or, they may simply become too entitled — 46% of parents say their kid has used their card without permission, after all.

Inheritance

Disputes and division related to inheritance is a tale almost as old as time itself, appearing as a common theme throughout the Bible and classic literature. In fact, 15% of siblings have argued about the fairness of inheritance.

When it comes to dividing money, or assets in a parent’s estate, one sibling may feel they deserve more because they helped their parents more (e.g., giving up their job to care for them). Or they may feel that a particular sibling deserves less because they received more financial support from a parent earlier in life.

Giving everyone equal amounts of the inheritance is always a good idea. 

“There’s no such thing as deserving. Money should not be used as a reward or to demote someone,” Gardenswartz says, adding that not giving equal amounts to everyone can cause resentments between family members.

Most families never discuss inheritance due to feeling uncomfortable or not wanting to think about it. A study from Ameriprise found that only 21% of parents planning to leave an inheritance told their children how much they would receive. 

As a result, many are in for a nasty surprise: Most people who receive an inheritance get less than $100,000, even though about 75% of those people expected to get more. Sometimes, parents have financial difficulties or debts their children are unaware of, which affects how much parents can ultimately pass on.

Aging relatives

The most significant conflicts sometimes happen not when a family member dies, but when they age. People become more likely to see declines in their decision-making as they enter old age, and the financial sphere is no exception. 

We all know the stereotype of the “confused pensioner” who falls for a scam or is tricked into giving too much to charity, a problem that can become especially concerning for older people who are dealing with conditions like dementia. But problems can still arise even in the absence of a diagnosed condition.

For example, if children (or other relatives) try to be too proactive in managing an elderly relative’s finances, the relative may feel like they’re being controlled. This can lead to interpersonal problems, such as the relative refusing to grant power of attorney to a loved one. It’s not an easy situation to navigate. 

How to avoid division

The first step to ensuring money is never the cause of familial rifts is having open communication with your loved ones. It might seem obvious, but it’s missing in many relationships. 

“Families get so busy with their lives that they forget to talk about money, and it’s not a topic most people would want to discuss anyway, especially if there are second or third spouses involved, or other non-blood relatives,” Selsor says.

Talking about money starts from a young age. Parents should be open and transparent about money from the get-go. Even if they don’t want to disclose their salary to their children, they can share information about how they’re budgeting for purchases and making big financial decisions, outlining the plans and sacrifices they’re making along the way. 

As children get older, parents need to prepare their children for what will happen as they age. 

“Ideally, the parent would lead the discussion, and tell the family at least part of their plan,” Selsor says. “At the very least, children need to know who to contact when they pass away — such as a lawyer, accountant, or financial advisor.”

Parents also need to plan for what they’ll do if they lose decision-making abilities. For instance, at what point should decision-making be transferred to someone else? 

In the case of aging relatives, trustees can step in and take care of an elderly parent (if the parent has the resources to pay for them). This is a good alternative to a power of attorney — choosing someone financially independent of everyone involved ensures there’s no conflict of interest.

Regardless of life stage, open communication and financial literacy are major steps to help avoid division in families due to money. When money and its use within the family are understood, inheritance and other financial concerns can be dealt with effectively.