HANDLING STEPFAMILY MONEY
By Margorie Engel, Ph.D., ©1999*
Money does not have a neutral connotation in stepfamilies. Money will always be a major issue for remarried couples because trust, commitment, and the guarantee of permanence are the underlying issues. As a result, it is hard to put together the perfect money management package. However, because of previous life experiences, these couples are typically ready to search for creative solutions to new challenges. Stepfamilies often have a combination of three money pots — yours, mine, and ours.
Labeling The Money
Some remarried couples cannot fathom pooling together all of their financial resources while other couples can't imagine not doing it. Each side is convinced their philosophy is the secret stepfamily strategy to a happy financial relationship. And, it seems that both sides may be right. Informal studies show that couples who favor pooling their money into an "ours pot" are no more or less satisfied with their money management that those who keep money separate. In either case, the legal realities of marriage are binding enough that pooling is not necessary to make the couple financially linked and interdependent.
Separate Accounts: "Yours" and "Mine"
Husbands and wives may be embarrassed to initiate a discussion about ways to keep stepfamily finances separate. Feeling the need for separate money seems to evolve from circumstance as much as temperament. When couples desire separate finances, they are acknowledging that they have separate or different interests and that they want to make certain financial choices as an adult without needing to ask "permission."
Even though they love each other deeply, the effort to "avoid potential hassles" prompts many remarried couples to keep their money as separate as possible. "Avoiding dependency" is another reason for choosing to keep separate stepfamily money. Divorce laws have sent a clear message to all married women that financial dependency is not, and will not be, rewarded. Stepfamily couples may deliberately arrange their finances to preserve individual autonomy in routine money matters, even though most of them have not negotiated a formal financial contract.
We tend to create two separate families living under the same roof when each remarried parent pays for herself or himself and her/his children's expenses. These "separate pot" couples strongly believe that each partner must contribute an equal share toward stepfamily household expenses, which is seldom fair. Most wives do not earn as much as their husbands and incoming child-support payments don't often make up the difference. Therefore, her 50% will be a much larger percentage of her income than her husband's 50% share of the expenses. When this equal concept doesn't work out, the wife winds up feeling dependent and the husband feels he is paying too much. The old model of men providing all financial support for the family doesn't fit for stepfamilies; neither does the newer idea of a 50/50 split.
A completely separate system also tends to fall apart in a stepfamily financial crisis. There are two particularly decisive moments: a can't-turn-down career opportunity for one partner and a corporate down-sizing causing job loss. Out of necessity, these couples find themselves financially merged — at least until the crisis is resolved.
Real-world situations call for a new philosophy. Even when remarried couples begin a relationship with the intention of keeping money separate, they tend to drift into at least some pooling of funds. Mixed Accounts: "Yours," "Mine," and "Ours" Because they are married, couples cannot legally escape responsibility for one another's economic decisions. From a practical standpoint, individual preferences for separate stepfamily accounts often begin to take a back seat to convenience. It appears that the best of all worlds for many remarried couples may be one of two variations on the "three pots — yours, mine, ours" system: • small separate accounts and a large joint account • large separate accounts and a minimal joint account
Joint accounts are funded equally or, more often, in proportion to each spouse's wherewithal. Stepfamily couples seem to compromise on issues that are joint financial responsibilities and handle their own accounts independently. For many stepfamily couples, each spouse comes to the remarriage with a credit history, credit cards, and individual bank and brokerage accounts. They typically continue to maintain their own accounts. Remarried couples often agree to pay for ordinary expenses related to their biological children (residential and child support payments), insurance premiums, repairs and maintenance of property individually owned (cars, rental property), and personal expenses for clothing, business costs, medical expenses, hobbies, and gifts. Joint expenses such as rent/mortgage, cleaning, groceries, entertainment, and family/couple vacations are paid for in a flexible manner according to ability to pay. Most remarried couples also struggle valiantly to accumulate savings for emergency funds and investments.
Financial advisors suggest keeping cash flow separate from investments. It is preferable to fund joint accounts for children and household with the income stream from employment and/or child support collection. This avoids the typical situation wherein wives spend most of their money for consumables (family food, clothing, vacations, treats for the children) and husbands put most of their money into appreciable assets (mortgage, stocks, retirement funds).
One Big "Ours" Account
Stepfamilies often find themselves easing into pooling their finances. This pool drift frequently starts by establishing a joint vacation fund, purchasing a replacement household appliance, or having an "ours" child. Sometimes there's a purely psychological transition. When all of the money is put into a common pot, couple decision-making is critical to successful money management. Confrontation may arise regarding one spouse dominating financial decisions or non-recognition of the pooling — and that is usually what the remarried couple is trying to avoid.
It is important to make basic decisions about management of stepfamily money in the common pot. These include:
- A record-keeping system (running totals or monthly tally).
- Who's going to be responsible for bill paying from the account.
- What will be paid for out of the joint account.
- How much each spouse can withdraw without discussing it with the other.
The joint bank account needs to be set up at a branch where it is convenient for each spouse to deposit and withdraw money. As with most team efforts, husbands and wives typically handle different financial activities according to their ability to get the job done. Sometimes, especially after a bad financial bookkeeping experience in a prior marriage, couples need to earn each other's trust.
HOWEVER MONEY IS HANDLED...
Stepfamily money — separate accounts, pooled accounts, or a "his"/"hers"/"ours" accounts system. There's no right or wrong way to handle the finances in a remarriage. The comfortable balance will change with the amount of money available, the length of the marriage, and evolving needs. The initial stepfamily money management system needs to be flexible, not carved in stone.
Talk about each of the options. During this discussion, consider how you will treat each other if the initial choice proves wrong after a trial period. Once the hearth of your new financial system has been laid, schedule regular review periods of your temporary solutions for permanent problems. Ask yourself, "Is it broken? Should we fix it?" Something is always working and something is always failing. Keep the choices that are working well and replace the duds with new options. It's an ongoing process that requires compromise and renegotiation. And remember, it doesn't seem to matter which financial system is chosen as long as stepfamilies meet needs for both of the adults and the children.
* This article first appeared in Bride Again magazine,Winter 1999. Permission granted for use on the NSRC web site by Bride Again magazine.