When young Americans who want a family life imagine the future, they probably envision something close to the traditional American dream of getting married, having kids and living happily ever after. To the extent they do any long-term planning, the typical young adult figures there will be plenty of time to save for retirement while juggling work and family obligations.
But life doesn't always go as planned.
Sometimes fate intervenes, in the form of divorce, an elderly parent needing to move in, or an adult child "boomeranging" back to the family home in the face of a tough job market.
To gain a better understanding of how these life events affect the finances of various modern family units — including blended families and multigenerational households — we sought to understand their approach to family finances as part of the Allianz Love Family Money study.
In the study, we surveyed more than 4,500 Americans and found that even if the people living in these modern family structures are finding emotional support and joy in their new configurations, finances often suffer. Long-term planning may go on the back burner while the family tends to its members' more immediate needs.
Blended families — defined as parents who are married or living together with a stepchild and/or child from a previous relationship — for instance, have put aside an average of $157,800 for retirement, significantly less than the $251,100 of traditional families, comprised of a heterosexual married couple with at least one child under 21 living at home (the survey included people with a household income of at least $50,000 a year).
More than half of blended families (55 percent) say they "currently live paycheck-to-paycheck" (compared with 41 percent of traditional families), while nearly one-third (30 percent) cite one of their worst financial habits is "not saving any money." Just 20 percent of traditional families say they have that problem.
Only 46 percent of blended families said they are on track to achieve their financial goals, compared with 60 percent of traditional families.
Clearly, the cost of ending a first marriage and splitting financial assets is a handicap — 43 percent of blended family members in our survey agreed that "my spouse/partner or I brought financial baggage to the relationship that's difficult to overcome."
A variety of life events can create a household with three or more generations living together. In our survey, these included supporting a member with health problems (49 percent) or financial problems (44 percent). Many respondents cited numerous benefits to the family. For example, more than a quarter (27 percent) said having extended family in the house is helpful for child care and household responsibilities.
However, several generations living under the same roof can be a financial strain, too. Multigenerational families were more likely to say they feel financially burdened by the number of family members living in their home (34 percent) than were other types of families. Multigenerational families shared this concern with boomerang families (where the adult children come back to stay) with 42 percent saying they are feeling burdened.
Of the seven different family types we surveyed in the Love Family Money study, the multigenerational families were more likely to feel a great deal or some stress about covering current financial expenses (72 percent) than other modern families. They also worry about getting out of debt (67 percent) and caring for a parent or relative financially (60 percent) more than other modern families.
These stressors make it less likely these families will have the time or energy to focus on financial planning. In fact, our survey showed they were less likely to have consulted a financial professional than traditional families.
Meanwhile, parents who welcome an adult child back to the fold may go back to work to pay the extra cost, or delay their own retirement.
By contrast, traditional families aren't as sidetracked by big changes in their households, and can focus on saving for the future. The average traditional family in our survey is more likely to have talked with a financial professional and have more money saved for retirement.
Don't forget to plan
The study tells us that saving money for the future can be a problem for people whose family structure undergoes an unexpected change. Financial planning in these situations can be complex, given all the people involved. For instance, financial planning for blended families should address their challenge to provide for children from different marriages in estate planning, as well as funding college.
To get on track, families in these complex structures should seek help from a trusted friend or a financial professional who may have experience dealing with unique family structures.
They often can provide the guidance these modern families need to balance current pressures with long-term planning for tomorrow.