A financial literacy gap grows between partners if couples don’t manage their money together.
It’s easy to let your partner take care of the bills now — but what happens when you break up?
A new study published in the Journal of Consumer Research finds that your financial smarts either appreciate in value or plummet when you’re in a relationship, depending on how involved you are in managing the money each month.
“Life comes with a lot of responsibilities, and one way that relationship partners help each other is by dividing these up,” Adrian Ward, who conducted the research at the McCombs School of Business at the University of Texas at Austin, told Moneyish.
But while it makes sense that both people don’t need to cook dinner every night, they do need to stay on top of their finances together. When it comes to money, Ward says that many couples don’t share the responsibility equally enough. “This means that one person will be getting more and more financial experience over time, and the other won’t,” warned Ward.
People usually enter relationships with a comparable grasp of finances to their partner, but Ward observed that one person will often accept primary fiscal responsibility. So the longer that couple stays together, the more the partner handling the bills and investments grows financially literate, while the other lags behind. “In our studies, the gap is statistically significant after about 5.5 years,” said Ward, “but it doesn’t occur overnight at that point; it’s a gradual thing.”
So why do people hand over financial responsibility to their partner? More than half of women (63%) in a recent CreditLoan.com survey said they defer because their partner makes more money than them. According to the Pew Research Center, women ages 25 to 39 earn 89 cents for every dollar a man in the same age group earns. Forty percent of men said their partner has more time to take care of the finances, and about half of men and women both admitted that their other half is just “better at managing money than me.”
That’s the case with George G., who declined to share his last name., who has lived with his 54-year-old boyfriend for the past year. He told Moneyish that he prefers having his beau, who makes significantly more than he does, handle their finances. “He’s in charge because I’m awful with that stuff, but I do have a concept of where our finances stand,” said George, 28. “We share most of the expenses, but he owns the house that we live in, and I don’t pay rent.
But when it comes to his own credit card, cell phone and Spotify accounts, George pays his own way. “Our Netflix account is registered in my boyfriend’s name, and I genuinely don’t worry about what will happen to things like that if we break up,” George said.
Dana K., 33, who also declined to give her last name, said she and her husband of two years manage their money together. “We have separate credit cards that are paid from a joint account, and we each have our own investments that we consult with each other about, but we invest independently,” Dana told Moneyish. And because the couple had separate stock accounts before they married, they decided to continue to invest separately. “All of our liquid money is in one account and our paychecks go to the same account,” she said.
That’s a smart move. Not taking charge of your own finances can have serious repercussions: Your savings, credit accounts and insurance policies can lapse or grow delinquent if you’re not paying attention,New York Times bestselling author Nicole Lapin told Moneyish. “Often, all the bills will be under one person’s name, so the other person’s credit can suffer,” added Lapin, because they won’t have had a chance to build any credit under their own name.
The CreditLoan.com report also warned that many participants have suffered financial or economic abuse in their relationships. The most common example was one person buying the other something expensive and then holding it over their head (reported by 9.3% of men and 6.1% of women.) Women were most likely to complain about a partner making fun of their salary (7.3%), but both genders cited extreme cases such as a partner maxing out their credit cards or blocking them from accessing their bank accounts.
And Lapin added that when women get divorced, it’s common for them to have to rebuild credit because they either don’t have any credit (as they were on their partner’s account), or they have bad credit. “It’s important to determine whose name everything is under, and it’s important to manage your own accounts,” she said. In fact, CreditCards.com reports that women’s credit suffers more than men’s in a divorce, with 54% saying their credit score declined during their marriage and 50% saying their exes ruined their credit.
Caitlin P., 37, who also declined to give her last name, racked up more than $70,000 in credit card debt after getting divorced. “Since I was forced to pay him alimony, I couldn’t afford to care for myself and my daughter, so I had to put everything on credit cards for almost two years,” she told Moneyish. It’s taken her six years to pay everything down and rebuilt her credit.
Plus, the CreditLoan.com report also found that people who share the responsibility of managing finances with their partner report being the most satisfied with their relationships.
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