Money and Relationships: How Financial Literacy Can Help
Dear Readers: If I were to ask couples to name the top three things that keep them together, I don't imagine that shared knowledge and interest in their finances would make the list. Yet money is often cited as one of the main causes of divorce. A recent survey by Policygenius found that 1 in 5 people say their partner is financially irresponsible. And these people are over 10 times more likely to break up over money issues than people who say their partner is good with money.
I always recommend that couples get to know each other financially at the beginning of their relationship, but that really is just the start. A relationship can be a lifelong journey, and your financial togetherness is an important part of it. There are bound to be gaps in each partner's financial attitudes and know-how, so, to me, it's essential for every couple to not only discuss their priorities but also increase their financial knowledge along the way. Because financial literacy is also a lifelong journey.
I've had the opportunity to talk to a few couples lately whose own experiences demonstrate how being financially aware and informed can bring people closer together. I thought you might be interested in their stories. (Of course, I've changed their names.)
30-somethings Consider a Prenup
Jessica and Aiden, both in their late 30s, were recently engaged. Both had growing careers, and each had already accumulated some assets. One of them had a considerable number of employee stock options. While they had been together for a couple of years and already had a reasonable knowledge of each other's financial attitudes, marriage made them look more seriously at both their individual and joint financial futures. The big question was: Did they need a prenuptial agreement?
They met with a financial advisor to talk about the pros and cons. Their advisor helped them understand that a prenup isn't only about what could go wrong but also about helping them figure out positive ways to work together. Because, big picture, creating a prenuptial agreement takes a willingness to be completely open and honest about everything -- what you own, what you owe and how you want to live your financial lives together. That takes absolute trust.
They talked about what assets they'd share and what they'd keep separate; how they'd handle current and future debts; if one or the other would take the financial lead; and, finally, what they'd do if they were to ever split up.
Talking about a prenup not only helped them answer some important questions; it pointed out some holes in their financial knowledge. While Jessica and Aiden ultimately decided they didn't need a formal prenuptial agreement, talking through it brought any concerns out in the open and made them feel they were on the right financial track -- together.
Second Marriage Presents Financial Challenges
When marrying for the second time, John, age 60, and Cynthia, age 55, knew they had to deal upfront with how much they were willing to marry their finances. Each had a home and investments, and Cynthia had two kids to consider. Plus, one of them had considerably more assets than the other. As you can imagine, these circumstances brought up not just financial issues but also emotional issues, which can be especially complex when marrying again later in life.