Money Conversations: A Family Affair

When spouses and partners agree about money, the holiday spirit can last all year long.

Money Conversations: A Family Affair

Here we are in the middle of the holiday season, and you and your spouse or partner are probably in a cheerful mood and getting along famously.

The congenial holiday spirit continues throughout the year in most households — but in some it doesn’t, and the reason is often … money.

Money is considered one of the leading causes of divorce. But we’ve observed that it’s usually not a lack of money that leads to breakups. Rather, it’s a lack of trust, communication and compatibility on money issues.

Two surveys provide data supporting our perspective. A Harris poll in August found that many married respondents don’t share details about their retirement accounts with each other. According to the survey:

  • 23 percent have no idea how much their partners have saved.
  • 21 percent have no idea how their partners’ retirement accounts are constructed or how much is in them.
  • 30 percent don’t talk to each other about how much they need to save in order to retire.
  • Almost half aren’t talking to each other about how to invest their savings.
  • Of those saving for retirement through brokerage accounts, 43 percent admit they make trading decisions on their own without consulting their spouse or significant other.

A Fidelity survey last year found a similar lack of communication between spouses and partners. Although 72 percent of respondents claimed they were good communicators about money, the survey revealed that:

  • 43 percent didn’t know how much money their spouses or partners earned; 10 percent of those who guessed were off by $25,000 or more.
  • 47 percent disagreed with their spouses about how much they’d need to maintain their lifestyle in retirement.

Poor communication was greatest among baby boomers — but newlyweds also struggle with this issue: Experian found that about 20 percent of grooms and 12 percent of brides have bank accounts their partners don’t know about.

What causes such a lack of communication and trust about money? Here are four standout factors:

1. Fear. You might be afraid that your spouse will leave you if he or she finds out how little you’ve saved.

2. Background. Perhaps you come from a family where money was never discussed, and it feels awkward or distasteful to talk about it.

3. Power. Your spouse or partner might be using money to manipulate you, perhaps by controlling your spending or limiting your access to money.

4. Compatibility. If your style of money management is different from your partner’s — say, if you are a saver and your partner is a spender, or if you are focused on the future while your partner lives for today — conflict can lead to divorce.

One fact cannot be dismissed: Money is a family affair.

This doesn’t mean you must commingle all your assets or manage your money the same way — or even that you must devote equal amounts of time to the subject. Nor is there only one way to manage the money you each have.

But it does mean that the two of you must be in agreement about how the family’s finances will be managed — from bill-paying to investing to buying cars and insurance. In some of our client households, one person pays the mortgage and the other pays the rest of the bills. Others put equal amounts of money into a joint checking account from which all bills are paid, keeping the rest of their funds separate. In other cases, one spouse is the breadwinner and the other pays the bills and handles the finances.

Whatever your style, you’ll know your approach is successful if you both are happy with the arrangement and your finances are well-managed. If either condition is not being met, your system must be changed. Otherwise, tensions can build, and strife can result.

Let us know if you’re having problems in this area. We can help you devise an approach that satisfies both of you, helping eliminate a big stressor — and a common cause of divorce.

If it’s all going well for you, think for a moment about your children, grandchildren and relatives. Share this article with them — and invite them to contact us for help if needed.

Originally published in Inside Personal Finance December 2016

More Financial Planning Advice