- Many first-generation Americans support their parents or other relatives.
- Traditional financial planning doesn’t account for that, so I developed new tools for my clients.
- I recommend building a “family savings fund” for relatives so you always know what you can offer.
I was sitting across from a client at brunch and asked if she’d worked with a financial advisor before.
“I have,” she said.
“What was your experience?”
“Well, he looked over my budget and noticed I was sending money to my brother regularly. He said if I just stopped sending money to him, I could save. It took me two years to try seeing one again.”
I’ve told this story in multiple workshops and in almost every one, someone chimes in and says this has happened to them too. Most financial planning doesn’t address the multigenerational needs of people of color.
Many first-generation Americans are supporting parents and others
Many of my clients are #FirstGenKids. They are first generation in this country, first-gen college graduates, first generation with a high-paying salary, sometimes all three. They’re more likely to have student loan debt, less likely to have a history of homeownership, and more likely to be sending money back a generation. They are often the first in their families to have an opportunity to create generational wealth.
My parents are immigrants, but we’ve been lucky in a lot of ways. My mom came here through a Filipino nursing program and it was a stepping stone to higher-paying work and benefits. My dad got a college degree in the Philippines, which wasn’t valid when he immigrated, so he stayed home.
They were homeowners as far back as my memory goes, which allowed us to have financial stability throughout my entire childhood. There was never a hint that me going to college meant I would be supporting them when I got my first job. I was able to pursue a literature degree guilt-free. Not having the pressure to find a high-paying job is a privilege I’m still grateful for. Many who are first generation don’t have that experience.
The most common financial challenge for many of my first-generation clients was how to take care of other family members while also taking care of themselves. I had clients who were covering their parents’ rent, responsible for the family’s phone plan, and the “money person” in a family emergency.
They were tapping into their personal savings to cover these costs and didn’t track how much they were spending to their families. They came to me feeling frazzled by these financial obligations, but also expressing that one of their values was to be able to support their family.
This is where I recommend the family savings fund.
How the ‘family savings fund’ works
The family savings fund is a simple but powerful tool that allows you to give to family members, set personal boundaries, and make space for your family values.
First, figure out a regular amount you can afford to send to your family. It can be a monthly or an annual amount you’re comfortable giving away.
Then, open a separate savings account (feel free to even label it “family savings fund”) and set up regular transfers into this account. If you have an annual amount, divide that by 12 to find your monthly contribution.
Most likely, family members will be coming to you last minute for help because they really don’t want to be a bother† Having a family savings fund set up means you can plan for these unexpected emergencies. You don’t know when you’ll need to tap into it, but it will be there when you — and they — need it.
This fund will also give you a clear line in the sand for when you can’t support your family — if there’s no money in the account, you can say no and create this boundary until you’ve built up the reserves again.
When my mother-in-law needed additional financial support, we started sending her $300 per month. After about a year, she said she didn’t need it anymore because she was able to cover her regular expenses.
We started redirecting the $300 a month into a savings account labeled with her name. She came to us if she needed her brakes repaired or new furniture. We even used her savings fund to help her move into a new apartment.
The family savings fund has given many of my first-generation clients (including my family!) peace of mind in a way that aligns with their values. You can give back to your loved ones who helped you get this far and make sure you’re able to take care of yourself and the next generation.