Money in Multigenerational Homes | Money Management | Exodus Lending - Exodus Lending

Managing Finances in Multigenerational Households

By Kaitlyn Szabo January 28, 2021

In 2018, the Pew Research Center found that more than 1 in 10 American parents were “multigenerational caregivers” because they provide unpaid care for a child (or children) under 18 years old and an adult, such as a relative, friend, or neighbor. Often, this extended family lives together under the same roof, which presents unique financial challenges. 

Stretching limited income streams to take care of children and dependent adults can seem daunting. However, consistent, honest communication and realistic budgeting can help make the day-to-day stresses of a large household more manageable.

Communication in Large Families

Firstly, the more people there are in your household, the more different money goals and needs you’ll likely need to consider. Because of this, it’s important to practice good communication habits to get everyone on the same page and, hopefully, on track to meet as many unique needs as possible.

Budgeting for a Multigenerational Family

One major takeaway from your conversations should be a budget that works for everyone. Here are the first steps you’ll need to take together.

  1. Establish your base income. Add up all the money all household members bring in to find your total household income. For our purposes, some examples of income include wages earned and Social Security or disability checks.
  2. Identify your essential expenses or “needs.” Work together to take stock of all the money you spend monthly. Then, split these costs into “needs” (essential items for you and your family to live and work) and “wants” (nice but non-essential items). Once sorted, prioritize expenses in a list from most important/needs to least important/wants (e.g., rent/mortgage payments, healthcare, groceries, utilities). If you’re looking to cut costs, here are some strategies for saving money in a multigenerational household.
  3. Create clear expectations of individual contributions and responsibilities. Determine what each member can add to the collective income and what they pay from the joint expenses. In other words, take the numbers gathered for steps one and two and break down the economic load between all contributing household members.

In terms of choosing a budgeting method, there are several different options. For example, your family may choose to follow the 50/30/20 budgeting method; 50% of your income going towards needs, 30% going towards wants, and 20% going towards savings. If 50% of your total household income is not enough to cover all your needs, then you can try the 80/20 budget, in which 80% goes towards necessities and 20% goes towards saving.

Money Management E-Newsletter: January 2021