Did you know your taxes are due in four days? If you’re the “money person” in your relationship, I’m sure you do! Most couples naturally peg one partner to handle joint financial decisions, says marketing professor Adrian Ward, even though “we’re not always very thoughtful about who should get responsibility for what, or what the long-term consequences…might be.” Plus, it’s an especially risky business for women, who often outlive their spouses. How can you change the dynamic? Read our conversation below.
Katie Couric: Why is it so common for one person in a relationship to take on all or most of the responsibility for financial decision-making?
Adrian Ward: In many ways, having just one money person makes sense; it can allow both partners to benefit from just one person’s hard work and expertise. But our research shows that there may be an important downside to giving up financial responsibility: while the “money person” improves in financial knowledge and ability over time, the other partner does not. Over time, relying on your partner can leave you unable to make good financial decisions on your own.
Talk about the moment when your own research revealed (much to your surprise!) that you were the “money person” in your relationship. What happened?
We started our research by looking at how being the money person in a relationship (or not) affects the development of financial ability over time. As we started learning more about the important consequences of how couples distribute financial responsibility, we began to wonder how these initial decisions about financial responsibility were made. What determines who becomes the money person?
To our surprise, our research revealed that things that “should” matter for the job—things like prior financial experience, financial knowledge, or credit score—don’t seem to predict who becomes the money person. One thing that does predict levels of financial responsibility in a relationship is how much each partner is contributing to other shared tasks at the time they start sharing finances; for example, you might become the money person if your partner is putting a lot of hours into home repairs or household chores when the first shared bills are due—even if you’re not very good with money. In relationships, we work with our partners to manage the responsibilities of daily life—but we’re not always very thoughtful about who should get responsibility for what, or what the long-term consequences of dividing up responsibility might be.
These insights from our research made me think carefully about how my partner and I managed financial decisions. Like many relationship partners, we had started to “specialize” without really thinking about it—and I was becoming the money person! This had nothing to do with who was better with money at the start of our relationship. But, based on our research, I knew that it could cause my partner and I to become more and more different in our financial knowledge and ability over time. I had considered taking responsibility for financial decisions as a way of contributing to our relationship, and helping my partner by giving her less to worry about. But I hadn’t considered that I might also be undermining her own financial capability.
What steps did you take to correct the situation? Was it difficult to give up some of the responsibility you had assumed?
Luckily, we started thinking about these issues soon after we started sharing finances, so our roles were not too entrenched. Our research also shows that most relationship partners never switch roles once one partner becomes the “money person.” The biggest thing we did was decide that both partners should always be “in the loop” when it comes to financial decisions. For example, we both met together with a financial advisor to discuss retirement planning, even though it might have been easier or more efficient for just one of us to take the meeting (and make the decisions).
Financial decisions can often seem overwhelming, especially when the stakes are high and there isn’t an obvious “right” decision. As anyone in a relationship can attest, there are both pros and cons to making difficult decisions together. But I wouldn’t say it was difficult to give up some control, for two reasons. First, my partner is very financially responsible (thank goodness!). Second, I want to be the best partner I can be, and that involves thinking about the long-term well-being of my partner. Making sure we’re both “in the loop” means that she’ll be better equipped to make good financial decisions if there comes a day when I’m no longer around. It can be hard to think about death or cognitive decline preventing us from relying on those we love—but we both want to make sure she’ll have one less thing to worry about if that ever happens to us.
Generally speaking, what’s the profile of the “money person?” Is it usually the man in a heterosexual relationship? Given that women typically live longer, what problems could that ultimately pose?
On average, men are more likely to become the “money person” in heterosexual relationships (although some research suggests this might be less true for millennials than for older generations). And if there’s an age gap between partners, the older partner is more likely to become the money person.
Both of these tendencies could result in the non-money person being suddenly thrust into the financial driver’s seat later in life, after decades of riding shotgun. Our research indicates that this could pose substantial problems—whereas the money person has spent a lifetime developing financial skills, the non-money person has let any financial skills they originally had stagnate or decay. We find that the more financial responsibility you give up, and the longer you give it up, the worse you do on tests of financial knowledge and decision-making relative to your partner—for example, choosing financial investments or auto loans. Perhaps even more troublingly, we find that those who give up more responsibility for more time also learn less when they are provided with financial information. In other words, relying on a partner for a long time can undermine not just what you know about money, but also your ability to learn.
Our research indicates that it’s important to think ahead about who needs to know about money, and when. Putting off learning about money until the “money person” is unavailable will almost certainly leave you vulnerable.
Why is it necessarily so bad to have one person in a relationship designated to handle finances – particularly if they’re more naturally drawn to it
Having just one person in a relationship handle the finances might not be such a bad idea…until it is!
Assuming the money person has both partners’ best interests in mind and isn’t terrible with money, letting just one person handle the finances can be an efficient way of handling responsibilities as a couple. Both partners don’t have to know about money if only one person is making the decisions—so both partners can benefit from the money person’s knowledge, and the non-money person is free to handle other responsibilities.
The problem arises when the money person is unavailable, whether due to death, cognitive decline, or simply the fading of romantic interest. Relying on others to make decisions for us prevents us from developing our own knowledge. And knowledge is power when it comes to finances—it helps us understand information, make decisions, and evaluate advice. Without it, we are vulnerable.
So how is your relationship today?
Fantastic—thanks for asking!