Living in different countries doesn’t mean families cannot share financial responsibilities, but these arrangements are generally more complicated and require more planning than simply supporting family members. These arrangements can take many forms, and, as with any financial arrangements, it is wise to have a clear plan in place to maximize benefits to all parties involved.
Finances become complicated when money crosses borders. In addition to normal expenses and payments, currency values, payment methods, and more can change day to day. Therefore, families need a clear plan for managing all financial obligations required to support relatives living abroad.
Start With a Clear Picture of Shared Expenses
Shared expenses must be tracked. The family must track which shared expenses each member has paid. How will they remember? Where will they write it down? A simple online spreadsheet can track all of the family’s shared expenses. You can also use the same spreadsheet to create a family budget for those expenses.
Track and record financial contributions, spending, and other shared expenses so everyone stays on the same page; where possible, track them individually so you can total them later. Utilize online shared spreadsheets or budgeting apps to keep track of said financial contributions. Make sure to clearly categorize shared expenses (e.g., household utilities and supplies rather than household members’ individual debts).
Identify whether the expenses shared among family members are predictable. For example, the amount of money you need to send to help family members with household expenses each month can be planned in advance. On the other hand, an emergency repair to a family member’s home or an unexpected medical bill would require money at short notice and would be considered an urgent expense.
Make Cross-Border Payments Part of the Plan
Cross-border payments should not be an afterthought, as several factors can affect a transaction when conducted regularly. For example, processing times and fees can affect the amount the payee receives. Currency conversion can also cause the amount received to fluctuate from one transaction to the next.
For families with relatives in the U.S. and Mexico, it may help to learn how to send money to Mexico online to understand the available services and how they work before you need to make a transfer. This knowledge can help you plan for items like rent, tuition payments, household bills, and many other expenses.
This can include receipts for wire transfers, as well as confirmation emails for online money transfer services. Families should keep a running total of how much money they have sent in a given time period in order to have a clear sense of what they have spent and how much support they are providing.
Agree on a Budget Instead of Handling Each Request Separately
Cross-border finances can quickly become stressful if each expense is viewed in isolation and dealt with on an ad hoc basis. Recurring conversations to determine how much money is needed and who should be contributing to it can create a great deal of uncertainty.
As part of cross-border financial planning, establishing a general budget for a family’s shared finances helps set clear boundaries and reduces the likelihood of constant money-related requests and financial decisions. It is also very important to take into account the money that family members need to set aside to meet their individual financial commitments and save for their future. The key to successfully managing a family’s cross-border finances is to help each family member manage their own financial affairs while, at the same time, supporting the financial needs of other family members living abroad.
In addition to listing all expenses related to supporting family abroad, families should also list and total all expenses for the households of the people sending money. These include rent or mortgage payments, savings plans, and debt payments. Supporting family abroad should not put the households of the people sending money in a financial bind.
Keep Currency Changes in Perspective
In addition, families sending money abroad should keep in mind that exchange rates can affect the amount of money received in the recipient’s bank account. While families don’t need to monitor currency exchange rates on a daily basis, they should be aware of how much the same amount of money in U.S. dollars can be worth in the recipient’s country after conversion by the money transfer company.
For many families, sending money regularly means dealing with fluctuations in the exchange rate between the sender’s currency and the recipient’s currency. For long-term support of family members abroad, the best approach is to include a measure for currency fluctuations in the family member’s budget. From time to time (every 3 months), they should review how much money they receive from abroad in real terms (i.e., after accounting for inflation in local and foreign currencies, as well as changes in the exchange rate).
Mark down the change in value in your support planning so that you are not surprised by it in due course.
Create a Small Cross-Border Emergency Fund
Also, cross-border emergency funds for unexpected expenses have to be managed carefully. Until the emergency has passed, money in the emergency fund can easily be used for other purposes. Therefore, keep this money separate from money for regular expenses.
It’s worth it for families across borders to create the smallest fund possible to deal with unexpected situations. The fund doesn’t have to be in a separate account. One just needs to set aside the amount of money they’re willing to spend on unexpected, cross-border situations.
By setting clear expectations for what counts as an emergency, families can avoid spending cross-border emergency funds on non-essential items and keep them from becoming part of regular household expenses.
Review the Arrangement From Time to Time
Over time, the financial arrangements relatives make can change. For example, you or a relative may change jobs, move to a new house, retire, or finish school. As a result, the financial arrangements between relatives may need to change as well.
It can also be wise for families to periodically review their cross-border financial support to better organize it as their lives change. By asking and answering a few simple questions about cross-border financial support, families can determine whether it is still working effectively.
Are the same financial needs or expenses still being covered? Is it still affordable for the person sending money to support their relatives’ financial needs? Have fees, exchange rates, or the household expenses covered by the money sent by the sender changed? Are the other relatives aware of the financial responsibilities the sender is expected to cover for each upcoming financial obligation?
Cross-border finances don’t have to be complicated if you organize them well. Clear expectations about what money is to be used for, simple records, a realistic budget, and regular check-ups are all that is needed to make sure that cross-border finances do not become a source of stress.
