Navigating finances and family dynamics

Navigating the intersection of money and family dynamics is a delicate task. When finances and family combine, various emotions, values, and aspirations can bubble up — and that can lead to some challenging conversations. However, balancing family and finances isn’t just about making smart financial decisions. It’s also about taking care of the relationships and supporting each other’s goals. 

By approaching financial issues with empathy, understanding, and a shared commitment to finding common ground, families can move forward even when challenges arise. The ultimate goal? Putting their shared money to work for them, while also strengthening the ties that bind.

Families often encounter conflict when discussing money, but the root causes of these disputes usually go far deeper than meets the eye. Money can symbolize many issues that are otherwise bubbling under the surface. From reinforcing insecurities or complex power struggles to influencing feelings of self-worth, arguments with family about money are hardly ever just about the cold, hard cash.

Conflicts can become especially heated when money takes on an outsized role in defining someone’s sense of self-worth. As net worth becomes intertwined with self-worth, family members may experience a distorted perception of their personal identity. This makes conversations about money much more emotionally charged. In certain situations, money can also stand in for a lack of emotional connection between family members, becoming a substitute for affection and care. Therefore, there’s a heavier emotional load on any financial discussions.

Unresolved issues of power and control can also lead to financial conflict. When money imbalances exist within a family — for example, if someone earns more and dominates the financial decisions — it can cause a power struggle. This can especially happen if the more authoritative person disregards the input and needs of others. Inequality like this can erode trust and breed resentment among family members. That’s a recipe for tensions to escalate and spill out beyond just the financial matters.

Interpersonal and intergenerational conflict about money within families might be rooted in societal norms and cultural expectations. Certain beliefs and values about wealth, success, and responsibility can create tension — for instance, the pressure to uphold traditional gender roles. When these expectations clash with different realities within the family, it can lead to a fair amount of stress and anxiety.

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An estimated 75% of individuals are likely to have conflict over inheritance in their lifetime. And with the number of disputes about wills seemingly rising, inheritance is one of the most fraught financial topics families have to navigate. How wealth is transferred when a family member dies can trigger intense emotions, both during the creation of a will and in the aftermath of a family member’s death. That’s why, when creating a will, it’s crucial to reflect on who will be affected by it and — as much as possible — how to address their different feelings and needs. 

Two things that can help with inheritance drama? Honesty and clear communication. Full transparency may initially lead to tension or conflict, but in the end, it gives everyone a better chance at finding a reasonable resolution. Concealing information or deceiving family members can heighten emotions and strain relationships, especially after a death in the family. Instead, it’s worthwhile to have discussions while family members are still alive. This lets people openly share their intentions and thoughts — and makes it easier to avoid assumptions and misunderstandings later on.

Mixing work and family is a collision of private and public worlds. However, with 75% of entrepreneurs and 81% of established business owners co-owning or co-managing their businesses with family members, this blend of work and private lives is the norm for many. Yet only 19% of family businesses have conflict resolution protocols in place — so tensions are often inevitable. 

When unresolved family conflicts resurface, it can quickly impact business decisions. In a multigenerational business, structures that once led to success may now be outdated and ineffective. In these cases, getting help from professionals with experience in managing and defusing conflicts can be instrumental. At the end of the day, the priority is to keep both familial relationships and the business intact.

Nevertheless, despite the challenges, working together as a family has major potential. It can offer a unique opportunity to get to know family members on a deeper level while working towards a common goal. Plus, family businesses can serve as a platform for educating the next generation about savvy money management, the importance of strong relationships, and the value of collaboration.

Borrowing money from a family member can be a sensitive situation to navigate. If this comes up, it’s a good idea to consider both the financial and relational aspects. There may be a desire to help, but it's crucial to look objectively at the circumstances before agreeing to lend money to a family member.

Research shows that lending money to family members has mixed outcomes. A Bankrate survey conducted in 2019 found that approximately 60% of Americans have loaned money to family or friends. However, 37% of those reported losing money, and 21% said the loan had a negative effect on the relationship. So, when it comes to family loans, it’s important to have a clear plan for how the amount will be fully repaid. Otherwise, there could be both financial and familial damage.

Likewise, sometimes the best thing is to say "no" to a family member who asks for money. It can be a way of protecting financial assets and the relationship at the same time. Instead of immediately transferring money, it may sometimes be better to suggest alternative resources or connect family members with financial institutions that are better equipped to help.

Worried about balancing the complex dynamics of money and family? It doesn’t have to be stressful, but it does take open communication, shared values, and a focus on the future. Start by fostering a safe and non-judgmental atmosphere where family members can openly discuss their attitudes and values about money. This includes exploring how money is used, saved, and shared within the family and understanding the interplay of different financial values, goals, and habits. By comparing perspectives and finding common ground, families can create a solid foundation for their shared financial decisions.

For resolving conflicts, a little active listening goes a long way. Trying to understand different viewpoints — and the emotions and dynamics that underpin them — will help ease tensions. Empathy, understanding, and a shared commitment to maintaining strong family relationships are all key. With these ingredients, families can foster a positive and supportive environment where everyone feels heard and valued.

However you like to spend, save, and manage your money, N26 empowers you to do it with confidence. As a fully licensed bank, we have the same security regulations as any other bank — and features that let you do security your way. Set daily spending limits, lock or unlock your card, and reset your PIN anywhere in the world, 24/7 and directly from the N26 app. After all, you’re in control and it’s you that decides how much you spend, and what you spend your money on. Set up an N26 account in minutes and get full control of your finances, all in your N26 app.