How to Solve 6 Tricky Family Money Problems
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How to Solve 6 Tricky Family Money Problems

Things can get dicey when you mix relatives and finances. Our experts reveal the smartest moves for six touchy situations.

My husband lost his job six weeks ago and we're having trouble making ends meet. We try very hard not to discuss finances in front of our children, but they're clearly worried. How can we reassure them without revealing too much?

"The biggest mistake people make is to try to protect kids by keeping them in the dark," says Neale S. Godfrey, author of Money Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Children. "They can always sense when there's a problem and will assume the worst." With kids 7 and under, you don't need to say much beyond "Daddy's looking for a new job" -- and that's only if they ask. For kids 8 to 12, add another layer of detail, letting them know how this new reality will affect them: "We have to save money, so we can't do ballet lessons this year." And if you have teenagers, use the current economic situation as a "teachable moment" to explain what's happening and why you need an emergency fund.

With older kids you can also encourage frugality. Ask a middle schooler if he's willing to save his lunch money and pack a sandwich instead; a teen might volunteer to downsize her allowance. "In difficult circumstances, the kids who adjust best are the ones who feel they're doing something to help," says Godfrey. Hold a family meeting every few weeks or so to keep the kids in the loop. That way, if you end up having to make a major change (like getting rid of one of your cars or moving to a smaller house), the news won't completely sucker punch your children.

The wealthy parents of our 12-year-old daughter's best friend have asked her to join their family on a European vacation, even volunteering to cover her flight. We can't afford to pay our daughter's whole way but feel strongly about contributing something. What's the least-awkward solution?

"Your discomfort in this situation is completely natural," says Dave Ramsey, author of The Total Money Makeover: A Proven Plan for Financial Fitness. First, figure out the amount you can afford to chip in. Perhaps it's the price of your daughter's airfare or $500 toward the overall cost. Then call the parents -- or, better yet, ask them to dinner -- and explain that you appreciate their generosity but need to pay something in order to feel okay about the trip. After the girls return, treat them to lunch and a movie or perhaps a day at a skating rink. By making a contribution -- regardless of how much -- and repaying the favor, you've changed the spirit of the relationship, so you're not cast in the role of freeloader, says Ramsey. And by talking to the parents, you'll feel more relaxed about the whole arrangement. Finally, keep in mind that the invitation might not be entirely selfless. After all, the parents are getting a playmate for their daughter out of the deal. On a seven-hour overseas flight, that can be priceless.

My sister-in-law is buying her first house and has asked if she can borrow $5,000 toward her down payment. I want to help, but lending money to family members seems risky. What's the best way to handle this?

No rule says you have to lend her money -- and the fact that she hasn't saved enough to make the full down payment suggests she might not be financially ready to buy a house. Even if you unequivocally trust your sister-in-law, the situation can be tense, says Ramsey, who recalls that he once borrowed money from his father-in-law and never truly relaxed about the debt until it was fully paid off. And what if your sister-in-law doesn't pay, or puts it off until after she's bought a sofa and built a deck? Then you've got a major drama on your hands.

If you decide to help, Clark Howard, author of Clark Howard's Living Large in Lean Times, suggests drawing up a promissory note that both parties sign. (Sites like LawDepot and RocketLawyer provide templates.) Agree on a simple payment schedule, say $100 per month plus interest over 30 months. For the interest rate, use a number comparable to what a local credit union or bank charges for a personal loan. If you feel funny charging a relative market rate, go ahead and lower it, but experts agree that you should charge something. "This sets up the expectation that this is a real loan that must be paid back," says Howard. Still, you should be prepared for the possibility that you'll never see the money again, so don't dip into your retirement savings for that $5,000.

More Money Questions

My husband grew up poor and has always been insecure about money. We're not wealthy but we make decent salaries, put money aside for retirement and our kids' educations, and stick to a budget. But he still gets freaked out whenever I buy something that's not a necessity. How can I get him to calm down?

"Our childhoods definitely color the way we relate to money as adults," says Alexa von Tobel, CEO of the personal finance website LearnVest. You won't be able to completely change your husband's attitude, but you can structure your finances so that spending is less stressful. Von Tobel suggests that the two of you discuss your goals for the coming year. Set up a separate account for big expenses -- a bathroom renovation, a new TV, a tropical vacation -- and have a percentage of your paychecks deposited there each month. With the negotiation done up front and the money transferred automatically, you won't have to debate every time you want to pull the trigger on a big expense.

For day-to-day expenditures (clothes, groceries, lattes), Howard recommends the system he and his wife use: "We have a 'don't ask, don't tell' policy. Unless one of us wants to buy something above a certain amount -- you can set any threshold you want -- we don't discuss it." Otherwise, you could find yourself in a situation where your husband questions every swipe of the debit card.

Another solution that many couples swear by is his-and-her accounts along with a joint one for paying the mortgage, utilities, and other shared expenses. If the situation doesn't improve, consider meeting with a financial adviser, who can evaluate your finances and confirm that you're on the right track. As Ramsey notes, "Sometimes it takes a neutral party walking you through the math to make a fearful person feel okay."

My elderly mother is showing signs of senility, and my sister, who has a financial background, wants to take over our mom's finances. This makes sense from a competency point of view, but, sadly, I don't entirely trust my sister not to skim off some of Mom's money for herself. How do I set this up so I can relax?

Your accusation might be pretty explosive if you confronted your sister with it -- so don't. Instead, tell her you want to be a joint holder with her on all of your mom's accounts, advises Godfrey. The reason? "I feel like I need to be in the loop about Mom's finances, too." Divvy up responsibilities, offering your sister investment management while you handle bill paying. Even if she insists on doing both, this strategy means that you can review statements and make sure nothing is amiss. Do all of the banking online to monitor debits and view cleared checks. And agree that you'll consult each other before shelling out money for large purchases. Howard even recommends asking the bank to set up an account that requires any check over $250 to be signed by both of you.

If your sister pushes back, consider enlisting a bookkeeper to manage your mom's day-to-day expenditures. These professionals usually work in the offices of certified public accountants and charge between $15 and $25 per hour. A financial adviser can oversee her investments. (Fees vary; find a local adviser through the Financial Planning Association at Say to your sister, "I feel strongly about being involved, but I don't want this issue to drive a wedge between us. So let's bring in outside help."

My parents have virtually no retirement savings, so my three siblings and I need to pitch in every month. We all earn wildly different salaries, with one brother making around $30,000 a year and another making well into the mid-six figures. What is the most equitable way for the four of us to share the burden?

It's perfectly fair for everyone to pay the same amount. "Just because one brother has done well doesn't mean he should be subject to a 'success tax,'" says Howard. But an arrangement whereby each of you pays the same percentage of your yearly income (so the wealthier family members fork over more) could also work. Those who contribute less could compensate with sweat equity -- by taking Mom and Dad grocery shopping, say, or cleaning their house. The trick is to present these ideas as options, not demands, and see what everyone's comfortable with. "As a larger income earner, I might volunteer to give more," says Ramsey. "But if you tell me I have to give more, I might resist."

Can't agree? Howard suggests a compromise he calls "the big state, small state solution" (as in Congress, where every state gets two senators but the number of representatives is determined by population). Figure out the total amount your parents need per year and divide it in half. Split one of those halves equally among siblings; with the other half, have each sibling pay a percentage of total income, as described above. This insures that the modest earners don't get squeezed and your affluent brother won't feel he's bankrolling the whole endeavor.