Beyond equal shares: A parent’s guide to fair financial decision-making
Every kid is different. Supporting children with varying needs (and timing) means you’re making different financial decisions for each kid. While our children often want things to be black-and-white, sometimes the right assistance may take a different form for each child based on their circumstances. In my experience, these differences can create tension, but with thoughtful planning, you can maintain family harmony while also maintaining equity.
The following strategies can help you navigate complex financial decisions while making sure each of your children receive the support they need.
Strive for equal opportunity, not equal dollars
Each child’s uniqueness may require different types of support. For instance, one might thrive in a small, private school environment while another excels in public education. The goal is to ensure your children have the same opportunities to succeed, regardless of their needs. Instead of worrying about how much money you’re allocating for each, shift your focus on how you can provide your children with equal opportunities.
Action item: Create a list of each child’s unique strengths, challenges, and opportunities to identify how various types of support might benefit them equally. We can discuss.
Consider alternative strategies
When things appear unfair, you can create long-term equity through alternative support. Say one of your children attends a private university while another receives a full academic scholarship. You can balance your aid by establishing a Roth IRA or increasing annual gifts to the allowable tax exclusion limit for your scholarship child. Strategies like this can help balance perceived disparities.
Action item: We can create a spreadsheet to track significant contributions for each child, including education, major gifts, and milestones. We'll review your spreadsheet yearly and rebalance your support as needed.
Communicate your decisions
In many cases I see, children may have a difficult time seeing eye-to-eye on your choices, which is why communicating your reasoning clearly and consistently is key. Explain that fairness is about everyone getting what they need, not about everyone getting the same thing. If you can set expectations early and communicate along the way, you’ll likely have an easier time being on the same page with your family members.
Discuss how spending today could affect their future, and the potential tradeoffs. For instance, explain how funding private education might mean less available support for a home down payment later.
Action item: Consider planning a quarterly or yearly time for your family to meet and discuss how financial decisions will be tailored to meet each child’s needs.
Manage sibling dynamics
When one child sees another getting increased monetary aid for college or buying their first home, it may spark a rift in the sibling relationship that manifests as withdrawal from family activities, decreased communication, or increased competitiveness in other areas. Watch out for these subtle signs of contempt and address them before they become a bigger familial issue.
Action item: Create opportunities for siblings to collaborate on family money projects (i.e. giving to charity, budgeting, family vacation, etc.) to help build comradery around money matters.
Use financial literacy as a tool for empowerment
Regardless of the resources you provide, teaching children to manage money effectively may be the most valuable gift you can give them. Begin educating early with age-appropriate lessons about budgeting and spending wisely, and move to more complex topics like investing and debt management as your children enter teenage years.
Action item: Get a financial book like The Know-Nonsense Guide to Money, that you and your child can read and discuss together.
Move forward with confidence
Balance financial support by making thoughtful, individualized decisions that recognize each child’s unique strengths and needs. Open communication and empowerment can help maintain familial relationships in sometimes sticky situations.
At Affinity Wealth Management, we help families navigate these complex choices and create customized approaches that balance current needs with long-term goals in a personalized way to fit your family. Learn more about who we serve here.
Ready now? Schedule your initial Connect Meeting with an Affinity advisor today to learn more about how we can help you navigate fair decision-making and other complex family financial planning issues.