After all family and friends head out the door, and a few days pass, she’s left alone. At this point, the distraction is gone, and the fear begins to settle in – for her family, her children. Not only does she realize she now has to make it on her own, but the fear is also augmented because she has no idea how.
This is a simple scenario that – more often than not – can happen to many women in our community for various reasons: ending up on their own due to a divorce, a death in the family, or other affairs and circumstances. The pressure and fear are often exacerbated due to dealing with their current situational affairs and because they don’t know where to begin when assuming the responsibility of managing the family finances.
Such a scenario is an apt example of why financial knowledge and the sharing of significant financial information can be critical components of our family affairs. This enables our families to take care of themselves should the need arise.
Financial literacy in the Muslim community often lags behind the broader community. Perhaps due to cultural traditions, women are often left behind. Though each family has a different way of operating for financial management, general awareness and basic functional literacy are important. Here are three key reasons why families should make finances a family affair:
- As described, we want to make sure our partners and families can manage the family affairs with ease in the event of an emergency. While dealing with an overwhelming number of emotions, finances should not be an additional burden and stress source. Keep reading for a simple strategy on how to develop greater awareness within the family.
- As we raise our children to be empowered and strong young Muslims, financial management is an important aspect of developing a well-rounded approach to life. These topics range widely, including budgeting, saving, investing, discerning between halal vs. haram, charity, tax, etc. – and it’s no easy feat. As parents, we are half the time trying to figure out the landscape ourselves while recognizing the responsibility of imparting this knowledge and skillset to our children. If both partners have a greater awareness of their finances, they can share in the responsibility of ensuring their children are raised with a balanced view and skillset to manage their finances.
- Joint financial goals between partners can play a developing role in increasing their love for one another as they work together to better their financial wellbeing. This can sometimes be a test in collaboration and teamwork, but the more couples work at it, the easier it becomes. This way, they will be able to share in the struggle (one person should not have to shoulder all that pressure) and the rewards. This also results in a partner to be able to bounce ideas with and share perspectives on how to best plan for the future.
This might seem like a daunting task, especially if your system has been working well thus far. “If it ain’t broke, don’t fix it,” right? Well, here are some options around “improving” your system, depending on the level of involvement that each member of the family wants:
- Stay in the Shallow End: Perhaps what works for your family is that one partner controls and manages all aspects of the household’s finances. If the family is happy with that system, that’s completely OK. In this instance, what we would recommend is to keep your financial management at a high-level. At the very least, it is important to consolidate all relevant financial information for those unforeseeable circumstances. We’ve created a simple Financial Summary Template that should include all aspects of your finances and is continuously updated, such as your bank accounts, what investments you have, outstanding loans and debts, etc. Also, key documents should be kept in a consolidated hard-copy, or soft-copy folder, so it’s easily accessible if a family member requires them. This can be shared with your partner or key family members in case of an emergency.
- Family Corporation: In this scenario, a family can opt to manage their finances so that one person manages the major decisions but ensures the other is well-aware of everything. This system operates in the same fashion as a corporation. One person acts as the “Chief Financial Officer,” and the other acts as another key executive, who is involved in, and updated on, major financial decisions on an ongoing basis. The benefit is that one person can streamline all the financial activity while still obtaining opinions and feedback when necessary from a partner “in the know.” On the flip side, the other family member is not overwhelmed or inundated with unnecessary details.
- It Takes Two to Tango: This final system is dependent on the capacity, skill set and interest of both partners. In this scenario, both parties are typically very involved in all aspects of the finances, and tasks are then delegated to one or the other. This includes objectives such as: setting a joint budget, paying bills, joint savings goals and involvement in joint investment decisions. As you decide to endeavour on this approach, the financial education required may come with a steep learning curve. That said, there’s great value in going down this path so that all parties are comfortable and can add valuable input. This approach to financial management can potentially be the most complex, but as a result, it can also be the most rewarding, as you both work together to make the most of your finances. The benefit is that there is great transparency between the key members of the family, and the responsibility of managing the finances is felt by everyone.
Overall, this is not a one system fits all scenario – each family is different, and what works for one differs from another. The key is awareness, so that family members have a good understanding of the overall financial situation and the goals you’re working towards as a family. This is critical, and it takes all key stakeholders in the family to be open and willing to get through some of the bumps along the way to ensure better financial management in the future. Everyone wins when we’re all on the same page.