Do you discuss Finances with your Family?

Two incidents have motivated me to write this blog.

In one incident, one of my neighbors died in a car accident, leaving behind his family with no clue of his finances, right from the bank account to various assets and the investments the neighbor had made in his lifetime. For the wife, hell broke loose. To top this, the family's lack of understanding of finances left it shattered. The family now runs pillar to post, tapping all the pockets to check for funds for sustenance.?

In the second incident, my immediate neighbor had to?be immediately hospitalized?due to uneasiness and pain in the chest. Admitting the patient to the hospital and enrolling for the cashless Medi-Claim became a nightmare as the wife was clueless. She didn't have the basic information on PAN, Aadhar, company-provided insurance card, etc.

The patient recovered with timely help from friends and relatives but threw a vital message. Connecting the dots in both incidents, I could see the commonality that the family member, especially the spouse, was clueless about the critical and essential data on insurance, awareness of basic bank accounts, and?financial and non-financial assets.

One important reason the family is not aware of the finances is primarily?the emotional belief that nothing untoward or wrong will happen to the family member.?This assumption is paramount in family relations.?

The practicality and the crude reality of life?are missed?in many cases. The Black Swan event of COVID 2019 was an eye-opener. Lakhs of near and dear ones died of COVID, leaving behind a legacy of unfound and untraced finances. As per the RBI report in December 2023, a staggering Rs.42,270 crores were lying with public and private sector banks unclaimed due to failure of nominee updation or the dependents unaware of the bank accounts.?

All the above events taught me a big lesson: Discuss and update your finances with your spouse and the family.

To start with, I made a detailed file with various sections, viz.

a) bank account,

?b) fixed deposits,?

c) mutual funds,?

d) shares,?

e) real estate, and

?f) insurance policies.

I added the contact numbers of the banking relationship manager and insurance agent for any urgent matters. Since I regularly update my stock portfolio, I take a dump of quarterly reports and file them.?

In the corporate world, we have one-on-one (O3); in family life, I have set my monthly O3 with my wife, where we discuss the file and the changes made in the file. The idea here is to give an update on all the family's finances.

Likewise, my wife has prepared her file and?discussed?it with me. The objective here is to ensure that we know each other's finances.?Once a quarter, we conduct mock sessions where we reach out to our portfolio managers and insurance agents?just?to ensure that a) they still are our "GO-TO", and b) we establish rapport so that it comes in handy in case of any eventualities.

In day-to-day busy life, at times, people miss carrying out the following essential tasks which are critical from ensuring no challenges?are encountered?in the eventualities:?

1. Updating Know Your Customer (KYC)?
2. Adding nominees to your bank accounts, investments and real estate
3. Making a Will. Young people are hesitant and equally emotional when making a will. They need to prepare for this. But making a Will to transfer your legacy smoothly to your near and dear ones has become critical.?
4. At times, spouses or family members gift each other money on various festive occasions. It is important to capture such monetary gifts in Gift Deeds to avoid tax complications.???
5. At a minimum, keep PAN, Aadhar, and insurance cards in one common folder for easy access by both spouses.?

?Reflecting on the two incidents, the situation would have been different if the families had maintained discipline in discussing their finances and keeping each other updated.

Have you taken the time to talk about finances with your family?

What steps have you taken to protect your loved ones in case of an emergency?

Share your experiences and recommendations in the comments below. Together, we can foster a community of financially aware families.