Nontraditional families are having a harder time, so what can they do to get ahead?
A lot has been said about the loss of the traditional family unit in American culture, but whether you agree or disagree with the emotional side of the debate, facts are facts. Unfortunately, a new study seems to show statistical proof that nontraditional families are struggling more than their traditional counterparts.
According to the LoveFamilyMoney survey from Allianz:
- 49 percent of nontraditional families live paycheck-to-paycheck (traditional 41 percent)
- 57 percent say they are struggling (47 percent for traditional)
- Only 30 percent feel a high level of financial security (versus 41 percent for traditional)
- 36 percent have collected unemployment (21 percent traditional)
- 35 percent have suffered a loss of a main source of income (traditional 23 percent)
- 22 percent have declared bankruptcy (11 percent traditional)
What does this mean for nontraditional families and financial stability?
So does this mean that nontraditional families are doomed to struggle more? Gary Herman, President of Consolidated Credit doesn’t think so…
“The statistics aren’t showing a failure of nontraditional family units,” he argues. “What the numbers really show is that nontraditional families need new and better financial strategies. You can’t apply the old financial logic of a traditional family to these new kinds of households and expect the same kind of success.”
The LoveFamilyMoney survey defines a traditional family as one with two parents of the opposite sex who are married with at least one child under the age of 21 living at home. It also defines six other family units:
- Multi-generational families
- Single-parent families
- Same-sex couple families
- Blended families
- Older parent with young children families
- Boomerang families
“Each one of these unique modern family types needs a specialized financial strategy in order to be successful,” Herman continues. “That strategy has to address the unique challenges faced by that kind of family unit.”
To help nontraditional families get ahead, Consolidated Credit offers some tips for each specific type of modern family unit:
One of the biggest concerns is how many people are bringing in income. The middle generation is likely to be responsible for the lion’s share of earning, so adults need to be focused on securing the highest income possible with a focus on long-term job stability. If possible, older generation members should seek at least part-time employment.
Another major concern is likely to be healthcare costs. With both seniors and children, healthcare is likely to represent a large portion of the household budget. Employer benefits should be another key area for getting the right job. Make sure all members are covered by comprehensive insurance to avoid out-of-pocket expenses.
Good budgeting is essential with only one income to support the entire family. Make sure to plan ahead to adjust for seasonal changes (like back-to-school costs). Employment stability has to be a main concern in order to avoid a situation where you have no income or less income to support your kids.
There also needs to be a strong focus placed on saving – both short- and long-term. A good financial safety net is key to maintaining a stable household even through unexpected life events and employment changes. You also need established long-term savings and estate planning in place in case something happens to you.
Same-sex couple families
The big challenges here usually involve things like benefits, separate financial profiles and estate division. Depending on where you live, you may not be able to be on your partner’s health insurance, share credit profiles or provide death benefits in case the unthinkable happens.
Make sure to talk to a lawyer from your state to learn about how your financial world will have to be handle differently from a heterosexual couple. If the law in your state changes, you may need to revisit your financial plan and make adjustments accordingly.
This type of family has some very unique financial challenges. First, you may have one or both partners facing added monthly expenses with child support and alimony. You may also have extra costs for shuttling kids back and forth to the other parent’s house.
Your primary focus needs that kids on both sides are taken care of – equally. This is another area where things can get tough, because parents often try to spoil kids with stuff to make up for a changing home environment. Avoid this trap and remember that a stable home without fights over money is better than a house with the latest game console.
Older parent with young children families
The biggest challenge here is usually with long-term saving and financial planning. While older adults are likely to have more income to cover the expense of a new baby, that also means that the family is likely to be facing retirement and college at the same time.
Saving up for your kids’ education is going to be critical. By the time they are in school, you may be at or near retirement. A college education on a fixed retirement income is going to be tough, so you need to start saving now.
This type of family gained lots of attention after the global recession in 2009 – particularly since youth had the hardest time finding and retaining employment while our economy was in recovery. The focus here has to be on the budget.
Often, adult children will revert to their teen behavior when they get back in the home – spending their parents’ money without a thought about budgeting, with no attempt to help out and bring in extra income. If you’re in this situation, adult kids should have at least part-time employment while they look for a job in their chosen field. They should also be put on a budget and you should map out exactly how much (and where) they will contribute to the household.