Cultural traditions and familial structures can play a significant role in money management, and it is important to consider how multigenerational living – where multiple generations reside under one roof – can impact family wealth. For many Asian families – as well as within other cultures – multigenerational living is a cherished aspect of home life, but also one that comes with a unique set of financial considerations and planning needs.

In fact, the share of the population living in multigenerational households has more than doubled over the past five decades. As of 2022, there were an estimated 59.7 million U.S. residents living with multiple generations under one roof. Interestingly, the Pew Research Center found that those who are living in multigenerational households were less likely to live in poverty, with some of these households having more earners than the non-multigenerational households, providing a safety net in case someone loses a job.¹ Further, 14% percent of all home buyers over the past year indicated that their home purchase was motivated by a desire to accommodate multiple generations in their family.²

From saving and budgeting to dividing costs and estate planning, navigating the financial landscape of a multigenerational home calls for foresight and strategy.

What to consider when saving and budgeting money in a multigenerational household

If you are currently living in a multigenerational household, or plan to in the future, there are certain considerations to keep in mind when it comes to saving and budgeting money, such as:

• Diverse financial needs: Recognize the differing financial priorities and goals among household generations that necessitate tailored saving strategies – it is unlikely that a “one-size-fits-all” approach will be effective. Older members may need to set aside money for health care costs, while younger members may be focused on paying for education. As such, building in flexibility to accommodate different saving and budgeting needs is key.
• Short-term goals: Establish short-term savings targets, such as setting aside three to six months’ worth of living expenses for emergencies. This will help ensure stability and security for all household members by creating a financial cushion.
• Shared costs: Aim to allocate shared expenses like mortgage or rent, utilities and groceries fairly among household members to ensure equitable financial contributions. Setting these contribution expectations early can avoid any tension later. It’s also important to have a plan in place for how contributions should change if one person’s income decreases or increases significantly to avoid any tension or disagreement if and when that situation does arise.
• Long-term financial planning: Work toward a secure financial future for the family by planning out contributions to retirement accounts and education savings plans, laying the foundation for generational wealth and stability. These planned contributions should be reflected in the household budget to ensure they are prioritized.
• Open communication and financial literacy: Foster open dialogue and financial understanding within the household, empowering members to collaboratively navigate financial concerns and decisions through discussion, education and professional guidance.

Research indicates that there are financial benefits to multigenerational living, and that when executed intentionally, it can reap upsides such as improving health outcomes, reducing loneliness for older adults and bolstering educational outcomes for children.³

What to consider when dividing costs in intergenerational households

Dividing costs presents a unique set of challenges and considerations. Multigenerational households have to consider factors like:

• Fair Allocation: Ensure fairness by dividing costs such as mortgage or rent, utilities, groceries and household expenses based on each member's financial capacity and usage.
• Transparency: Maintain transparency by openly discussing financial contributions and expenses, fostering trust and understanding among household members.
• Flexibility: Remain flexible in cost-sharing arrangements to accommodate changing financial circumstances or unexpected expenses within the household.
• Shared financial goals: Align cost-sharing decisions with shared financial goals, such as saving for education, retirement or major household expenses to promote collective financial wellbeing.
• Communication: Encourage ongoing communication and collaboration to address any concerns or discrepancies in cost-sharing arrangements, ensuring a supportive financial environment where each member’s voice is heard.

Estate planning for intergenerational households

Estate planning in multigenerational households requires careful consideration to ensure the smooth transfer of assets and the preservation of family wealth across multiple generations.

• Comprehensive Documentation: Compile essential legal documents, including wills, trusts, powers of attorney and health care directives to outline the distribution of assets and clarify end-of-life wishes.
• Generational Needs: Tailor estate plans to accommodate the unique financial needs and goals of each generation within the household.
• Succession planning: Develop strategies for transferring ownership of family businesses or properties to ensure continuity and preserve the family's legacy for future generations.
• Frequent discussion: Talking about these topics regularly and openly so that everyone is on the same page is essential to navigating the complexities of estate planning as smoothly as possible.
• Professional guidance: Seek guidance from legal and financial professionals specializing in estate planning to navigate complex legal requirements and ensure that the estate plan reflects the family's intentions and objectives accurately.

The bottom line

In navigating the logistics of multigenerational households, from saving money to dividing costs and estate planning, several key considerations emerge. Recognizing the diverse financial needs of each generation and implementing tailored strategies are fundamental for fostering financial stability and satisfaction among all family members. By addressing these considerations holistically and prioritizing open communication and collaboration, intergenerational households can build a solid financial foundation, ensuring prosperity and security for all family members now and in the future.