Financial illiteracy has been quickly growing amongst younger generations ever since the great recession. Even equipped with the full availability of years worth of MarketWatch reports, Nation Financial Capability studies and all of the exhaustive meditations peppered in between, the reasoning is segmented across several theories, with no single one appearing more material than the others. The consequences, however, can be measured much more precisely.
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Because many retail investors do not properly understand compound interest and inflation, the economy suffers a $10 billion loss a year. Because back in 2009, 41% of U.S. adults (92 million people) rated themselves a grade of C, D, or F on their knowledge of personal finance, delinquent consumer debt has since risen to $1.3 trillion dollars. Many experts believe (though less is sure of why) that Americans have decided to exclude finance from virtually every context; academics, politics, and even in the service of strengthening their romantic partnerships.
Till debt do us part
The last bit is the great white whale of a new Northwestern Mutual report. The authors write, “The core of the idea is that you may have had a conversation about everything from dog or cat, to where you will honeymoon, and the two-point five kids you’ll have – but if you aren’t speaking the same language around money and what your goals are for your financial future, how lasting will that happiness truly be? It’s not enough to be Soulmates, if you aren’t Moneymates as well.”
Before you’ve committed to the notion of talking money with your partner, you have to be intimately familiar with your own position on the matter. Finances are an easy thing to lose track of when courtship is at the forefront. ‘Do you want kids and a white picket fence someday?’ is a much huskier way to ask ‘What’s your credit score?’ And ‘How do you plan on hacking your student loans away?’ But the more direct the better it seems.
Eighty percent of the participants reviewed in the Northwestern Mutual report, had preexisting or combined debt before they decided to tie the knot and only one in four were truly debt-free. Down the line, money woes proved to be more harrowing than how to raise the children and even frequency of playtime in the boudoir. The irony is the number of respondents that feel financial security to be an imperative feature of a healthy and long-lasting romantic partnership and the number of people that reported habitually talking about finances with their partners, are similarly halved. About 50% of respondents talk about money concerns with their others weekly, and less than 7% do so daily, which might be excessive anyway.
There are financial priorities that seem to either shift or get promoted when marriage becomes a serious consideration. The greater portion of respondents that were engaged during the time of the survey indexed finding a home, paying down student loan debt, and putting aside money for an emergency fund as the top three markers that need to be addressed before they step one foot on the aisle.
The authors behind the survey implore young newlyweds to extend the items on their dockets just a little more. Seventy-five percent admitted they didn’t take vacations or hobbies into account when budgeting, a similar margin said the same about retirement. The authors add, “The majority of engaged and married couples (67%) refer to themselves as beginner/entry-level planners, meaning they’ve taken some steps to develop a plan, but without the help of a financial advisor. In fact, less than 20% of engaged and married couples have met with a financial planner (16%), yet 50% desire financial overall financial security.”
Financial road bumps are bound to adulterate the aisle at some point or another, but they can only be detrimental if all parties pretend not to see them. Sixty percent of respondents said that they are honest with their partner about their fiscal shortcomings, while one in five confessed to concealing purchases and the depth of their debt in the last year alone. One in five may not sound like a lot, so I should add the study pool was comprised of 300 thousand participants, 45% of which claim to get overwhelmed with anxiety at the prospect of talking finances with their spouse.
“While everyone knows that being on the same page financially is critical to a happy, long-lasting marriage, and when they are not, it can be a source of friction down the road. Getting on the same page about the life couples want is an important step in the journey down the aisle and into the future, and Northwestern Mutual can help make couples’ shared dreams a reality — from the first anniversary to the 50th,” the authors wrote.