What Financial Advisors Must Know for Effective Family Financial Planning
Financial planning for the family is not the same as financial planning for an individual. For a single person, a financial advisor can typically focus on one set of priorities, such as the individual’s income, age, and future goals. With families, however, advisors have to factor in the ages, needs, and objectives of multiple members. They also have to pay attention to unique family dynamics and legal considerations, such as divorce, separation, or adoption.
A family financial planner must create a financial plan that addresses the financial needs as well as the temperaments of every family member. This article will discuss the essential things financial advisors should keep in mind to make family financial planning effective.
Table of Contents
Below are 4 tips that can help financial advisors carry out financial planning for a family:
1. Ask the family to set clear and specific goals
As a financial advisor, your first step should be to help families articulate their specific financial needs and goals. Without clarity on what they want to achieve, it can be impossible to create a plan that aligns with their needs. Make sure to ask the right questions and listen carefully to their answers to understand the goals that matter most to them.
For example, in most cases, parents may have multiple overlapping goals, such as buying a house, saving for their children’s college education, and preparing for retirement. Buying a home can, in most cases, coincide with another life event, like starting a family. Most couples buy a house when they conceive or have kids. As mortgage payments begin, the couple might simultaneously also need to save for their children’s future education expenses. A few years after the children head off to college, the parents will need to shift their focus to retirement to ensure they have adequate funds for their post-working years. However, not all families will have the same priorities. Some families may choose not to save for their children’s higher education if their kids decide against attending college. Instead, the parents might prioritize future goals such as extensive travel during retirement or pursuing other hobbies that require financial planning. Alternatively, a family with members who have a chronic health condition may face financial challenges. Some healthcare costs can be lifelong and far outweigh the one-time expense of college tuition. In such situations, the financial advisor needs to plan for ongoing medical expenses while balancing other financial goals like buying a house or planning for retirement. Similarly, some families might opt to use student loans for education costs rather than their savings. While this can free up funds for other priorities, the child would have to plan for debt management as soon as they get a job.
These decisions vary from family to family, and it is the family financial planner’s job to factor in each unique circumstance carefully. Therefore, they must understand the specifics of what the family wants. Based on what the family needs, the financial advisor can craft a financial plan that fits their exact objectives.
2. Discuss their personal family dynamics
Personal family dynamics, such as marriage, divorce, or adoption, can significantly influence a family’s financial situation. It is important for financial advisors to understand these personal dynamics when crafting a family financial managementplan. For example, when people get married, they typically bring both their assets and liabilities into the relationship. This includes combining not only their incomes, savings, and investments but also any existing debts. Consider a scenario where one partner has credit card debt, student loans, or a large mortgage. In this case, the couple’s joint financial plan may need to prioritize debt repayment, which could, in turn, affect their ability to save and invest for their future goals like retirement or home ownership. Moreover, financial habits can also differ from one partner to another. One person may be frugal, while the other may have a more spendthrift approach. These personality differences can lead to conflicts over budgeting, saving, and spending. Financial advisors need to help couples develop a joint financial strategy that can suit both personalities while still reaching their financial goals unanimously.
Divorce, along with being a significant personal event, also brings a lot of financial complications to a family. It requires a thorough reevaluation of financial plans for both partners as well as children. In many cases, one partner may need to pay alimony or child support to the other. This can be a substantial, recurring expense. The cost of running two separate households can also be overwhelming. Rent or mortgage payments, utilities, travel, and more may double, and each partner may be left struggling with their personal financial needs. In families with children, the financial complexity can be even more daunting. Divorce settlements may include contributions toward the child’s needs, such as education, healthcare, and extracurricular activities. Couples who maintain an amicable relationship post-divorce may be more willing to contribute more flexibly to each other’s needs and the child’s expenses. However, a difficult divorce can lead to rigidity, which can further affect the financial security of both partners and, at times, also their children.
If the couple plans to get married again, they can face additional financial challenges. There can be a shift in their individual financial priorities. A person who remarries may have children from a previous relationship and new biological or adopted children. Each of these children may have their own financial needs. For instance, a parent who initially planned for the education of one child may now have additional children to consider. They would not have to allocate more funds toward each child’s college, childcare, and more. This can impact their long-term goals, such as retirement savings, as the family’s combined financial resources would now be needed to cover multiple children. In cases involving adoption, the family may or may not receive financial support from the birth parents. In this case, the family would potentially have to spend more as adoptive parents. Healthcare planning also becomes essential in managing family finances, regardless of the specific family dynamic. Parents need to account for the healthcare costs of their children. They also need to plan for possible long-term care needs for elderly family members.
A family financial planner must be mindful of these personal dynamics and associated costs. In such cases, it becomes essential to discuss how families want to approach financial planning. Financial advisors must discuss whether couples prefer to individualize their expenses completely or save for the children together. Depending on the couple’s preferences, the financial advisor can draft a suitable financial plan that accounts for all of these factors.
SPONSORED WISERADVISOR
Choosing the right financial advisor is daunting, especially when there are thousands of financial advisors near you. We make it easy by matching you to vetted advisors that meet your unique needs. Matched advisors are all registered with FINRA/SEC. Click to compare vetted advisors now.
3. Explore retirement planning strategies
Retirement financial planning for the family can vary for couples, depending on whether one partner or both are working. Financial advisors would need to adjust their approach based on the family’s income sources and risk tolerance and build a retirement plan that aligns with both the couple’s financial situations and goals. When only one partner is earning, the responsibility for retirement savings rests solely on their shoulders. Since only one income supports both partners as well as their household, a financial advisor would have to adopt strategies that ensure there are enough retirement savings for their joint needs. This might include setting up a diversified investment portfolio with a balanced mix of growth and stability to protect the family’s funds against market fluctuations. Risk tolerance is also likely to be lower when only one partner is earning, as the financial security of the entire household depends on that single income. In this case, an emergency fund becomes especially important. An emergency account, with three to six months’ worth of living expenses, can help cover most expenses or income loss if the earning member loses their job. Financial advisors may also recommend investments that are liquid or easily accessible so that funds can be withdrawn in case of an emergency without significant penalties or losses.
In contrast, when both partners are working, the family would have greater financial flexibility. Dual incomes reduce the financial stress of retirement planning, as each partner can contribute toward the family’s retirement goals. Families with two incomes also have a safety net. If one partner loses their job, the other one can continue to support the family’s needs. This also reduces the family’s overall risk and allows financial advisors to suggest more high-risk and high-reward investments. For example, one partner can have a high-risk, high-return portfolio, and the other can choose a relatively more conservative approach to maintain a balance that could protect the household against large financial losses. This type of diversification can provide couples with more room to explore high-risk, high-reward investments without jeopardizing their retirement savings in case of an unexpected economic downturn.
Another advantage for dual-income couples is that they can both maximize their contributions to employer-sponsored retirement plans, such as 401(k)s. For example, in 2025, each partner can contribute up to $23,500 to their 401(k) plans, totaling $47,000 as a couple. Additionally, those age 50 or older are eligible for an extra catch-up contribution of $7,500, which can again increase their combined 401(k) contributions to $62,000 in 2025. Employer matching programs can further increase retirement savings for a couple. If both couples get an employer match, they can increase their joint savings even more. Financial advisors can encourage families to leverage these employer contributions to maximize their retirement savings fully.
Financial advisors must consider all of these factors when working with couples. Families may need to prioritize stability and their preparedness for financial emergencies if they are single-income households. On the other hand, in dual-income households, the family financial planner can focus on maximizing tax-advantaged contributions and balancing risk across multiple investment accounts to ensure higher returns while mitigating risk.
4. Discuss estate planning with the entire family
Estate planning is one of the most vital aspects of financial planning for families, and a financial advisor plays an instrumental role in it. Estate planning affects everyone in the family, so it is essential to create a plan that meets the needs of all family members. This process involves drafting a will, setting up health directives, implementing tax strategies, creating trusts, and more, depending on the family’s needs.
For instance, setting up a trust can offer control over how and when the money can be used. This can be useful for families where the parents and children have differing views on how the money should be spent. A trust also offers financial and legal protection for minors. Financial advisors can recommend trusts to families who prefer allocating their estate for specific uses and people. A will is another document that every family needs. A will specifies who inherits a person’s assets, including money, properties, collectibles, cars, etc. Financial advisors should explain how families can use a will to protect their loved ones. Financial advisors must also explain the benefits of including a power of attorney and healthcare directives. These can be particularly relevant if a family member has a health condition.
Financial advisors should also review and confirm that beneficiary designations across all accounts align with the family’s intentions. It is common for families to forget that certain accounts, such as 401(k)s, Individual Retirement Accounts (IRAs), and life insurance policies, pass directly to the named beneficiary, regardless of what is mentioned in a will. A family financial planner can help by verifying that the beneficiaries listed on these accounts match those in the will so there is no room for misunderstandings later.
To conclude
Financial planning for the family can help all members of a household achieve their financial goals without feeling overlooked or overwhelmed. While it is undoubtedly more complex than individual planning, open discussions and setting clear goals can help streamline the process. Financial advisors must carefully account for each family member’s unique objectives and ensure that their priorities do not overlap or conflict with one another. Additionally, they must remain mindful of the legal and personal dynamics at play, especially in families with more complicated relationships, such as divorce, separation, adoption, etc. Addressing these considerations can help family financial planners craft plans that balance individual needs with joint goals of the entire family. Use the free advisor match tool to get matched with seasoned financial advisors who can help craft an effective family financial plan to attain financial goals. Answer a few simple questions based on your financial needs and get matched with 2 to 3 financial advisors who are best suited to help you.
Other posts from Paladin Editorial
