This article appears in the November edition of the Financial Post Magazine. Visit the iTunes store to download the iPad edition of this month’s issue.
Every month, someone in my household is checking bills, making RESP contributions and scouring credit-card statements for savings. Is it an antiquated concept to consider that person head of the household?
Family finances can generally be divided up into three types of households, according to the Ottawa-based Vanier Institute of the Family, an independent charitable organization that studies family issues. One scenario has the lead adult making the investment decisions. Another will have the household divided 50/50, with finances among young couples less likely to be merged. In the third scenario, one person does everything and the partner doesn’t have a clue about finances.
“Historically, the finances were more likely to be from the male side of the equation and women were responsible for maintaining the household,” says Nora Spinks, CEO of Vanier Institute of the Family. But roles have changed as women started earning income. “It’s now more about who has the passion or the desire [to make financial decisions] or who has time or talent. It’s either you have finances or you do laundry and cooking. It’s less pre-assigned by gender.”
An HSBC survey in 2011 found that 65% of men make all the household’s major financial decisions, but more women are in charge when it comes to everyday budget items such as buying groceries. Jeannette Brox, a certified financial planner at Investors Group, says she’s finding that more women are involved in major financial decisions and even taking charge of them. But men and women, she says, definitely have different investing styles and tolerance for risk and debt. “Women are more conservative than men,” Brox says. Ideally, however, she wants consensus in families so that nobody feels “railroaded” into doing something.
In any case, the entire concept that someone is in charge of the household might be off base, says Melanie Buffel, a Vancouver-based money coach. “Some people avoid the whole concept of money altogether,” she says, adding that invites financial ruin if someone starts racking up debt. Not planning together is almost the equivalent of two subsidiaries of a corporation not talking. “I’m a strong believer in looking at your family finances like a business,” she says.
Does that mean someone in your family has to be the chief executive? No, Buffel says, since big decisions have to be made together. It is worth remembering that if you think your family needs a CEO, successful businesses always have some type of succession strategy so that somebody else in the company is ready to take over.
As for me and my penchant for checking statements and bills, my spouse describes me as the chief financial officer. I prefer co-CEO.