The hidden costs of family financial dependence—and how to strike a balance

Understanding financial enmeshment

Financial enmeshment occurs when family members are overly involved in each other’s financial matters—a situation with nonexistent boundaries. Historically, the joint family system in India fostered financial interdependence, where multiple generations lived together and shared resources. However, as modern families shift towards nuclear structures, these traditional expectations persist, creating tension between collective and individual financial goals.

Financial enmeshment is particularly evident during important life transitions, such as when young adults begin earning or middle-aged individuals end up supporting both their children and ageing parents.

For young adults, financial enmeshment can limit their ability to make independent decisions, such as saving for retirement, investing, or purchasing a home. Instead, their financial priorities are often dictated by the immediate needs of the family. This dynamic can delay the development of crucial financial skills, such as budgeting, investing, and managing debt. Without the opportunity to learn and practice financial independence, young adults may struggle to achieve long-term financial security.

Middle-aged individuals, often referred to as the “sandwich generation”, face a different form of enmeshment. They may find themselves financially supporting both their children and their elderly parents while also trying to secure their own financial future. Cultural expectations of filial piety—the duty of children to care for their parents—adds to the pressure, making it difficult to establish clear financial boundaries. This multigenerational financial dependence can create stress, limiting an individual’s ability to save or invest for their own needs.

Consequences of financial enmeshment

Financial enmeshment can lead to various adverse outcomes, affecting both emotional well-being and financial health. One of the primary consequences is financial anxiety, as individuals feel constant pressure to meet both personal and family financial obligations, leading to chronic stress and a sense of helplessness. 

In young adults, it may also perpetuate financial dependence, where adult children continue to rely on parents for support, or parents depend on their children, hindering the financial autonomy of both generations. 

Moreover, financial denial is common, as families avoid addressing debt or financial problems to maintain an appearance of stability, which can exacerbate issues over time. These consequences not only impact individual financial security but also limit opportunities for personal growth and financial responsibility.

While the drawbacks of financial enmeshment are significant, there are limited circumstances where it can yield positive outcomes. For instance, families working toward shared financial goals—such as saving for a child’s education, purchasing a family home, or supporting a family business—can benefit from pooling resources. In such cases, collective financial decision-making can promote stability and help achieve significant milestones.

However, these benefits are context-dependent and often come at the cost of individual financial autonomy. 

Breaking the cycle of financial enmeshment

Addressing financial enmeshment requires fostering open and transparent communication about finances within families. Indian families often avoid discussing money, treating it as a taboo subject. This reluctance to discuss finances leads to unspoken expectations and misunderstandings, further deepening financial enmeshment. 

Financial literacy is another crucial component. Parents should prioritize teaching their children about personal finance from an early age, encouraging them to manage their own money, set financial goals, and make independent decisions. This will empower young adults to take control of their financial future rather than relying on their families for financial support.

Setting clear financial boundaries is essential to preventing enmeshment. Families should explicitly define financial roles and responsibilities, such as how much support adult children are expected to provide or how long parents will continue contributing to their children’s finances. Establishing these boundaries will reduce misunderstandings and ease financial pressure on any one family member.

Finally, it is important to support individual financial goals while still maintaining family bonds. Families should encourage each member to pursue their personal financial aspirations, whether that means saving for retirement, investing in education, or purchasing a home. Balancing family support with individual autonomy can help create a healthier financial environment.

In the long run, breaking the cycle of financial enmeshment will contribute to a more resilient society, where individuals are equipped to navigate financial challenges while maintaining strong family ties.

Hardeep Singh Mundi is an assistant professor at the Institute of Management Technology. Simarjeet Singh is an assistant professor at the Great Lakes Institute of Management, Gurgaon. Views are personal.