Money Matters: How to Prevent Financial Fallout in Your Relationships

If you look at some of the main causes of divorce, financial issues are right up there near the top. It’s so prevalent that you will often find prenuptial agreements recommended not just because they can protect both individuals in the case of a divorce but because they can force a conversation about money that couples might not otherwise have. There’s a widespread belief that talking about money is impolite, and this can extend into relationships and families. However, these conversations can be critical.

Families of Origin

One of the first big talks you should have with your spouse or partner is about the role that money played in your own family when you were growing up. This can be surprisingly revealing for both of you. You may find that some of your own attitudes toward financial matters were shaped unconsciously because one of your parents was excessively anxious about money or tended to spend too much.

If you experienced financial insecurity as a child, you might be especially focused on establishing that security as an adult. If one parent had money but was especially penny pinching, you might find yourself being overly generous in reaction to that. Talking to your partner in a spirit of openness and discovery can be revealing and can help you better understand one another moving forward.

Reaching an Agreement

With your background out in the open, you can come to an agreement about how to manage finances as partners in a relationship. You might be more comfortable with each of you having separate accounts for your own expenditures and then a joint account that you deposit money into for shared expenses. Others might want to have only separate accounts or only joint accounts. You might agree that on purchases above a certain amount, you need a discussion and an agreement before moving forward.

As long as neither person is taking advantage of the other or being controlling, there are no right or wrong answers about how to split up your finances. There are a few red flags to beware of, such as a house in one person’s name that the other person contributes to via rent or renovation help. In a case like this, the person who isn’t on the mortgage but who is still contributing should have some kind of protection for that investment in case the relationship ends.

Knowing Your Options

It’s also important to have basic financial education. If one or both of you does not have this, that’s understandable; many people do not. However, you should try to learn such things as why compound interest is on your side when it comes to retirement accounts but not credit cards. In fact, a better solution than credit cards if you are looking to borrow money that you cannot pay back immediately might be a personal loan, which can offer lower interest rates. You can research lenders online to find out more about your eligibility and whether this is a good option for you.

Family Education

If you’re fortunate, your parents gave you a solid financial education, but this is fairly unusual. Whether or not this was true for you, you can offer that education to your children even if you never received it yourself. You can teach yourself now and later learn about things together. When your kids are young, clipping coupons, teaching them how to compare prices in the grocery store, and giving them an allowance can help them better understand some of the basics.

As they get older, you can help them open a bank account and explain concepts like interest and how it can drive both debt and investments. You can even experiment with investments yourself, creating a brokerage account and making a few investments, which you can do with just $100 or less in some cases. Essentially, strive to ensure that discussions about money are not taboo in your household. This can help your kids have a healthy attitude about financial issues and make better decisions themselves.

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