Making your way in the world as a young person has plenty of challenges. You might want to secure an education, chart a career path, get married, start a family and buy a house. All of these life steps come with their own hurdles to overcome and opportunities to seize.
For many younger Latinx professionals—sometimes called “first movers,” meaning they are the first in their family to attend college, land a corporate job and buy a home—there are additional challenges. “For many first-generation Latino families, it is assumed that your parents will live with you or a family member as they age,” says Ramona Ortega, CEO and founder of the personal finance platform My Money My Future. “Adult children who are caring or going to care for their parents have a different set of financial decisions.”
In other words, a large chunk of the Latinx population must include their parents, grandparents and even siblings as they create household budgets and financial plans. In fact, 64 million people in the United States (about 20% of the population) live in a house with at least two adult generations—usually parents, children and grandparents. For Hispanic families, the number of intergenerational households is even higher, at 27%.
Families Need to Communicate About Money
There are real benefits, both financial and emotional, to intergenerational households. Older generations can often assist with the extraordinary expense of childcare, allowing working parents to focus more time on careers. Some intergenerational households pool their resources as a way to build overall family wealth. “It’s not uncommon for Latino families to invest in real estate jointly, to co-sign loans for one another and to loan money to family for things like a down payment,” says Ortega.
But money—how and who spends or invests it, who earns it and who ultimately makes decisions about it—is inevitably a fraught and emotionally charged issue. While many Latinx families traditionally avoid talking about finances and how and who should handle spending and saving, not having open exchanges can ultimately fray important familial bonds.
“Communication is a big issue,” says Miguel Gomez, a certified financial planner with Lauterbach Financial Advisors in Texas and the longtime host of the podcast Dinero en Español. “For example, not being clear about the type of support that can be provided versus what is expected by other family members. Or thinking that the income-earning generation is rich and therefore able to afford anything.”
Active Decisions Beat Reactive Ones
Both Gomez and Ortega have observed multigenerational families that end up making decisions about money in a reactive, default manner or where financial choices are simply left up to the generation that brings in the most income. “Women have traditionally been the CFOs of Latino households and this remains true,” says Ortega. “What happens, though, is that people can be overwhelmed by running a large household on a limited budget and decisions are made by default instead of planning, which can be costly and inefficient.”
Fortunately, a better way—one that brings families together but also moves all generations closer to their financial goals—is possible. Communication is the foundation for better outcomes, which, for many intergenerational households, means removing the taboo around conversations about money.
After all, the only way to make sound decisions about saving, spending and investing is with clarity around a household’s collective income, debts and assets.
Starting the Conversation
One way to remove the taboo of talking about money is to set it in the context of wanting to take care of the entire family. “Having conversations about building intergenerational wealth is a great way to document information about assets and better understand your loved one’s financial profile,” says Ortega.
Establishing the right tenor is critical. Inquiries about finances should be viewed as motivated by the well-being of all generations and not individual intrusions on privacy. This allows for financial decisions to be grounded in reality. To do that, Gomez suggests applying the concept of “radical transparency” seen in corporate governance to the management of household finances. This is essentially the idea that there should be no secrets at all about money. “Let the entire family know how much money is available every month, show them how it’s usually spent, and together come up with ways to spend it better,” he says.
Similarly, Ortega advocates leveraging more open communication and financial transparency by creating a “house account,” where money is pooled to cover essential items like mortgage, rent, utilities, groceries and taxes. This balances meeting the basic needs of everyone living under the same roof with the desire to maintain individual privacy.
Meet Regularly to Align on Goals
While the establishment of a house account or implementing radical transparency can take care of the financial basics, it’s still important for families to meet to talk about bigger picture financial goals and obligations.
“There should be an assessment and conversation about family financial goals, including budgeting and insurance,” says Ortega. “This is also a great time to update beneficiaries, review mortgage documents and set up any new accounts. Also, if there is inter-family lending, the best way to document it is through a contract so the terms are laid out and everyone is clear about the expectations.”
Prepare for Challenges
It’s hard to sufficiently emphasize just how important it is to start and then maintain household communication about finances. It’s also important to understand that it won’t always go well and inevitably will lead to emotionally charged conversations.
When that happens, Gomez says there is one way to respond. “Try again. Learn from the experience. How did you feel? How did the other person feel? How did they react? Were they happy to talk about it? Were they defensive?” he says. “Having effective money conversations with family is something that can be learned.”
A former editor at Los Angeles magazine, Chris Warren has had work appear in publications ranging from Institutional Investor and Forbes to National Geographic Traveler, Oxford American and Greentech Media.