In any social gathering, engaging in conversations about politics or religion is often considered taboo if you want to avoid making enemies quickly. However, when it comes to family and friends, one of the most challenging topics to discuss is money and finances.
A Wells Fargo survey found that 44% of Americans consider personal finance the most difficult subject to talk about with others, even more so than death, politics, and religion. Despite money being a leading cause of stress in relationships and commonly cited as the primary reason for divorce, Time magazine reports that 40% of couples don’t discuss how they would manage their finances before getting married.
The dire statistics above are definitely similar in the Philippines. A survey by a major insurance company shows that money matters are the number one cause of quarrels among Filipino couples, a fact confirmed by other research on the topic. Herald Cruz, a counselor at the Center for Family Ministries at the Ateneo de Manila University, cites five reasons why marriages crumble and eventually fail, with issues about money taking the top spot.
Furthermore, it’s common knowledge that money matters are also a major source of conflict among siblings, especially regarding the inheritance left by their parents. The size of the estate doesn’t matter in these disputes.
Considering the importance of the matter, why is it so hard to talk about money with family and friends? While I have not come across any detailed studies on this, a major factor could be our family dynamics and culture. We Filipinos place a high premium on relationships, especially family relationships, above anything else. While this is indeed very laudable, it can lead to problems when it comes to money.
For fear of being labeled as “swapang” (too greedy for always talking about money) by family and friends, and the belief that everything will turn out alright in the end considering the closeness of our relationships, we tend to postpone serious money conversations. Many Filipino parents fail to plan for their retirement, thinking their children will take care of them when they grow old. Most Filipino children avoid discussing estate planning with their parents, fearing it might offend them or be interpreted as eagerly awaiting their deaths or inheritance. On the other hand, most Filipino parents have little or no regard for estate planning, expecting their children to get along after they pass away.
Debt is another issue. Many borrowers from family and friends suddenly develop “amnesia” and forget about the money they borrowed, thinking that even if they don’t repay it, their close-knit family or friends would not dare sacrifice their relationship over a “measly” amount. It’s also a fact that most Filipinos have a hard time saying no to family and close friends who ask for a loan. There’s always more than one “sari-sari” store that has closed down in a neighborhood because the good neighbors failed or took too long to pay off their debts.
It’s quite common for Filipinos, especially in the provinces, to spend huge amounts of money during “fiestas” even if they have to borrow from family and friends. Having a “party” during this time is seen not only as a religious obligation to thank the patron saint for blessings throughout the year but also as a status symbol. Filipino families do whatever it takes, even if they don’t have money set aside, to prepare for this time of feasting.
This “phenomenon” is not confined to occasions such as “fiestas.” For birthdays, child baptisms, “despididas” (goodbye parties), anniversaries, passing an exam, weddings, “pamanhikan/pamalaye” (a Filipino betrothal practice), etc., many Filipinos find themselves in deep financial trouble or having cash flow problems because of either debt incurred or diversion of funds intended for day-to-day expenses.
Traditionally, most Filipinos have the mindset that the wife should be the “purse bearer.” While this is indeed a good practice, considering it’s common knowledge that many Filipino husbands have more “vices” than wives, this traditional setup is not true in most cases. There are also many instances where Filipino husbands are better money managers than their wives, and there are cases where the wives have more “vices” than their husbands. Nevertheless, despite this fact, many Filipinos still opt to follow the traditional setup with the wife as the “purse” bearer.
Considering that our family dynamics and culture make it very hard for us to talk to family and friends about money, what can we do to overcome this problem?
Here are some simple and practical suggestions:
1. Sit down and talk about the problem openly, honestly, and frankly – I know this is much easier said than done. Many of us Filipinos don’t say things directly, and we assume too much. It’s time we change this mindset. Money problems occur in families because these matters are not being openly and frankly discussed. Whatever the issue – how money should be handled, who should handle it, what the budget should be, other vital money matters between husband and wife, possible distribution of inheritance among siblings, who will support aging parents and how – indeed needs to be thoroughly discussed. This should not be set aside, thinking that everything will eventually go well just because our families or relationships are strong and we place a premium on our relationships over money. This mindset needs to change, considering it’s what gets us into trouble in the first place. When calling for such a meeting, somebody should take the lead, preferably the elders in the family, such as the father, grandfather, eldest son or daughter, etc., given that we Filipinos have high respect for our elders. Don’t wait for each other, or nothing will happen.
2. Learn to say “No” – As discussed above, debt is one money issue where we Filipinos have a hard time discussing with family and friends. To avoid this problem in the first place, it’s better to say “No” to a relative or friend who wishes to borrow money. Saying “No” also applies to small and medium businesses, such as neighborhood stores, where saying “No” to neighbors who wish to avail of credit is important.
3. Instead of letting them borrow money, give it away – If a family member, relative, or friend really needs the money badly, instead of “loaning” the entire amount, “give” some instead. That way, you won’t harbor any bad feelings if the debt is not repaid because, after all, you don’t expect to be repaid! Of course, I’m not saying you should “give” away the entire amount being asked for (although you could choose to do this). You could say no to them borrowing money from you and choose to give a certain amount much lower than what is being borrowed. For example, if a relative is having trouble paying their electricity bill and wishes to borrow ₱3,000, instead of lending that amount, give them ₱500 or even something lower. This way, you’re still able to help in some way while sticking to your principle of not lending money to avoid relationship troubles.
4. Be practical – Perhaps the “saints” won’t bring you abundant blessings for the next year if you refuse to have a grand celebration at your next fiesta, or perhaps they will – who knows? However, one thing is certain: you will have a hard time with your cash flow if you go into debt just for the sake of having a grand feast. There is no direct correlation between the success of a marriage and the money spent on weddings. What’s important is how much a couple has set aside to start their new life together. A grand celebration for your child’s first birthday or baptism might surely impress your neighbors and your child’s godparents, but make sure your creditors won’t frown at you if you don’t pay them on time for the money you borrowed just to celebrate such occasions. While it’s true that we Filipinos care so much about feasting as it enables us to get together and fosters bonding among family and friends – something we treasure – there are ways to do this without breaking the bank or going into debt. You can be practical, make a simple celebration, or even postpone it to next year if you’re having a hard time raising funds for it.
5. Be professional and encourage family members and friends to do the same – One of the major causes of stagnation, lack of growth, or even the downfall of most family-owned businesses after the third generation or so is the failure to professionalize their business operations. A “tayo-tayo” or “inato” (in Visayan) approach in business will not work, especially if you want your company to grow big or succeed amidst a harsh and highly competitive business environment. Ask any successful family business, and they will tell you that one of the keys to their success is to “professionalize.” One way to do that is to treat each and every transaction with family members as an “arm’s length” transaction. Similarly, when dealing with money matters among family members and friends, we must act professionally and consider all transactions as arm’s length transactions. Proper delineation between what constitutes a gift and what constitutes a loan should be agreed upon. Children who borrow money from their parents should pay them at the designated time with the agreed-upon interest, if there is an agreed interest to be paid. To be professional or to consider transactions among family members, relatives, and friends as arm’s length transactions is to treat any transaction with them as if they are third parties and there is no relationship of any kind considered in the dealing. This has to be emphasized emphatically when such transactions are entered into. By doing this, the next discussions about money matters among family and friends will be much easier.
6. Know your limits and set boundaries – As much as we Filipinos love to place so much premium on relationships, we have to realize that there is only so much we can do to help out a family or friend in need. One just cannot “give it all away” as it might help solve the problem of a friend or relative but might have an impact on your immediate family. For example, if a close relative such as an uncle, aunt, or cousin on the husband’s side borrows money for hospitalization, and the husband immediately withdraws all of the family’s savings from the bank account without even consulting his wife, the immediate problem of the relative in need may be solved instantly, but this creates another problem between the husband and wife. What the husband should have done is sit down with his wife first and talk to her about the problem. They can then check and see if taking out money from the family would affect their family’s needs. They can then agree on how much they should help out. Another situation where this point is very applicable is when one of the spouses regularly gives to an aging parent. The couple can set certain limits on how much they should give monthly to the aging parents, ensuring that it won’t affect the family budget.
7. Help increase their financial literacy – A Standard & Poor’s Global Financial Literacy survey conducted in 2014 revealed that only about 25% of Filipinos are financially literate. 90% of workers worry about being poor in retirement, and 70% of elderly retirees are living with grown children. A 2017 Bangko Sentral ng Pilipinas Consumer Finance Survey reveals that only 19% of the country’s 68.6 million adults have some form of formal savings (referring to savings with financial institutions such as banks and cooperatives), and only a mere 3% are investing their money in privately managed investment vehicles such as stocks, bonds, Unit Investment Trust Funds (UITFs), mutual funds, and other managed investment schemes. While the number of Filipinos directly investing in the Philippine stock market is growing at a tremendous rate and registering double-digit growth, the total percentage of Filipinos directly investing in stocks is less than 2% of the total population.
So, what do these statistics have to do with difficult money conversations with family and friends and how you are going to deal with them? It’s simple – conversations with family and friends about money and personal finances might be much easier if you’re on the same page. If you’re financially literate and your family and friends are too, it would indeed be much easier as they understand what you know about money and your attitude towards it.
Following the advice in this point not only helps you have much easier conversations with family and friends regarding money and finances but also enables you to help increase the financial literacy of this country. By this time, you’re probably wondering how you’re supposed to do this. There are many ways to go about it:
– During Christmas, I usually give out books instead of the usual presents. I prefer giving “gifts of knowledge.” From time to time, I give out books on personal finance and stock market investing. You can take a page from my book and do the same.
– Giving an annual subscription to Money Sense Magazine Philippines as a gift might be a good idea too.
– If you can afford it, you can buy gifts related to finance and investments, such as giving out shares of stocks in listed companies (you can open a joint online account with a family member), buying insurance, opening a managed fund, buying an investment in a managed fund, or buying bonds.
– You can also bring them to free introductory investing seminars, such as those regularly conducted by the Philippine Stock Exchange and online brokerage services.
– If it’s not too much to ask and you can really afford it, you can take it to the next level by offering to pay for the personal financial education of your loved ones or friends through letting them attend seminars. Regular personal financial planning seminars are conducted by the Registered Financial Planners of the Philippines (RFP). You can even let them undergo Personal Financial Planner’s training if you wish.
– You can share memes and good articles on personal finance and investments with your loved ones through email, Facebook, and family group chats. RFP members like me often write in major newspapers, magazines, and blogs. From time to time, RFPs appear on TV and radio. You can share this information with your loved ones.
– If you can very much afford it, perhaps giving the gift of hiring a financial planner to work out the comprehensive financial plan of your loved ones and friends would also be a good idea.
Take note that while it’s true that relationships are more important than money, our conversations about money and personal finances and how we deal with such issues will eventually affect our relationships with our loved ones and friends. I hope the above suggestions will help you deal with difficult money conversations with family and friends.
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