Family Profile – Size, Composition & Financial Needs

Personal finance isn't just "personal"; it's often "family" finance. The number of people you support, their ages, and health determine your financial roadmap.

1. Understanding Family Profile

Your financial plan needs to align with your family structure. A plan for a bachelor is disastrous for a family of four.

A. Family Size

• Small Family: Lower expenses, higher ability to save per capita.
• Large Family: Higher bulk expenses (grocery, utility). Needs strict budgeting.

B. Family Composition (Lifecycle Stage)

1. Young Couple (DINKs): "Double Income, No Kids". High discretionary income.
   • Focus: Wealth creation, Aggressive investing.
2. Full Nest I (Young Children): Expenses rise (Education, Healthcare).
   • Focus: Term Insurance, Child Education Plans.
3. Full Nest II (Older Children): Peak expenses (College fees, Weddings).
   • Focus: Liquidity, Loan management.
4. Empty Nest (Retirees): Children leave. Expenses drop, but medical costs rise.
   • Focus: Pension, Medical corpus.

C. Dependency Ratio

• Formula: (Number of Non-Earning Members / Number of Earning Members)
• High Ratio (e.g., 1 Earner, 4 Dependents): High Risk. Needs huge life insurance and emergency fund.
• Low Ratio (e.g., 2 Earners, 1 Dependent): High Stability. Aggressive investment capacity.

2. Nuclear vs Joint Family Needs

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3. Financial Needs Mapping

Different members implies different financial products:

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4. Case Study: The "Sandwich Generation"

Many individuals in their 30s and 40s fall into this trap.

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5. Exam Notes: Writing the Answer

Question: "How does Family Composition affect financial planning?" (10 Marks)

Key Points:

1. DINKs: High savings potential.
2. Breadwinner: Need for Life Insurance (HLV).
3. Dependency Ratio: Higher ratio = Higher need for Emergency Fund.
4. Special Needs: Disabled members require a Trust structure.
5. Joint vs Nuclear: Discuss risk sharing differences.

Summary

• One size doesn't fit all: Plan must match family reality.
• Sandwich Generation: Needs careful balancing of duty vs self-preservation.
• Life Stage: Needs shift from Accumulation (Young) to Consumption (Old).

Quiz Time! 🎯

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