I think in this case they should focus more on explaining that this is for household family not for families in general.

That’s the case for every family feature ever though. Family is always short term for household. You can’t add your grandparents, cousins and uncles to your Spotify family either (if they don’t live in your household). And I don’t think anyone hearing about a family feature which allows sharing subscriptions expects otherwise.

I agree. Though children with split custody I wish was something that was considered a use case more often.