Biggest Challenge: Unpacking all that financial baggage
Four decades after Mike and Carol Brady joined their broods in cutting-edge TV matrimony, blended families—a couple and their kids from current and previous unions—have become utterly commonplace. While only 23% of the boomers who grew up watching the Bradys have a step-sibling, 44% of millennials do.
What hasn’t changed: how the financial baggage that remarrying spouses carry, combined with the tensions of providing for both biological children and stepkids, can weigh down even the happiest bunch. In the Allianz survey, 43% of blended families said that they have difficulty overcoming issues with money that they or their partner brought into the relationship; a third reported that inadequate support from an ex makes it hard to save. “Most people want to ‘do right’ by all parties involved, but it’s tough to do that without alienating someone,” says planner McDowell.
Plus, in blended households financial planning tends to be a singular, rather than a joint, pursuit. In the Allianz study, two-thirds of the adults in blended families said they were focused on individual needs and goals rather than the household’s.
Then, too, targeted advice can be hard to come by. “Our laws and policies are still based on the idea that everything you acquire as a couple is acquired together, and that your financial habits develop along with your kids’ needs,” says Margorie Engel, former president of the Stepfamily Association of America, “With stepfamilies, it’s reversed. Wham! You’ve got the kids. The honeymoon occurs after the kids leave the nest.”
The Solution: Make managing money a team sport.
Don’t confuse equal with fair, says Paula Bisacre, publisher of Remarriageworks.com. Many factors dictate the financial rules and roles that are right for your family, such as how much support you give to or get from an ex, and how much the various adults in question earn. You and your spouse don’t have to contribute the same amount for household bills or each other’s children, and may have different policies about what your respective kids get as gifts or for allowance. And that’s okay, as long as you explicitly work out the system that feels right to both of you, particularly when it comes to major expenses for each other’s children. It’s no problem if your ex does things differently, says Engel: “As long as the rules are clear, the kids will adapt.”
To avoid friction, some blended families find it helpful to maintain separate accounts. But that can also accentuate the feeling that you’re not working together as a team, so have a heart-to-heart about what works best for your household. Clint and Denielle Chaney, for example, decided to combine their finances completely. “When I came into the marriage, I felt like such an outsider,” Denielle says. “If I didn’t share in the family finances, I’d feel like an outsider even more. I didn’t want it to feel like it was him and his kids and me and my dog.”
And Don’t Forget…
Make saving a priority. With more expenses to handle than the typical household, blended families save far less, if at all, Allianz reports. Yes, it’s tough, but signing up for automatic investing plans at work or through a bank or brokerage can push you to adjust your budget to incorporate savings.
Be savvy about college aid. The income and assets of stepparents in the household with primary custody are factored into financial-aid formulas, says Mark Kantrowitz of Edvisors.com. If you split custody fifty-fifty with your ex, have the lower earner fill out aid forms.
Spell out bequests. Want to make sure your biological kids get their fair share after you’re gone? Set up a QTIP trust to leave some assets directly to your kids while also providing for your spouse.