The Salary Calculator

Couples and finances

by Madaline Dunn

In a relationship, there’s nothing less romantic than finances. However, research shows that speaking more openly and transparently about money can actually bring you closer together. This is especially true during the cost of living crisis, where research shows money is increasingly the focus of tension and arguments.

In this week’s blog, we’ll explore:

• Couples financing in 2023
• What financial infidelity is
• How to get better at financial planning and build financial intimacy

Couples and money talk in 2023

Research shows that when it comes to money, in relationships, pressure has really piled on in recent years, with the cost of living crisis making things increasingly difficult.

As a result, more and more people are reaching out for help in these areas. According to the website Counselling Directory, there has been an increase in the number of people using its site to find a therapist and in a survey of the Directory’s therapists, a third reported more clients have been talking about relationship problems caused by rising living costs.

Likewise, an Aviva study found that while 5% of couples argue with their partner about money daily, 12% have noticed a significant increase in the number of finance-related arguments since the cost of living crisis ramped up.

Financial infidelity

While many have heard of emotional or physical infidelity, financial infidelity is lesser known but equally as destructive. This kind of infidelity happens when there is dishonesty relating to personal finance in a relationship, whether that’s having a secret credit card, hiding debts or purchases or having a secret gambling addiction.

Aviva research shows that this kind of infidelity is actually rather prevalent, too, with two in five of those in a relationship or marriage committing ‘financial infidelity’. For example, 38% of people admit to stashing money away, with the amount squirrelled away averaging at over £1,600; 32% have more than £2,000 stashed away.

There are many reasons why people hide financial decisions from their partners, but researchers suggest that often, one of the main reasons is shame.

Interestingly, couples from the younger generations are more likely to commit financial infidelity. For example, 63% of Generation Z couples are followed by 54% of Millennials.

Speaking about this, Alistair McQueen, head of savings and retirement at Aviva, said: “Being upfront, honest, and transparent about your finances with your partner can help avoid problems in the future.”

Adding: “Having a general view of how much is being spent each month, along with overall debts or savings across the household can be important when it comes to making decisions about longer term financial objectives like when you can afford to retire, or whether to downsize your home to release some capital to help your children.”

Moreover, many are able to recover from financial infidelity. The road to recovery can begin by being honest with each other, and acknowledging that financial infidelity has taken place. Listening to each other without judgement can be difficult, but experts explain this a key step to resolving the situation. Likewise, experts also say it can be an opportunity to examine your relationship and finances and, in the future, strive for transparency.

Enhancing financial planning and building financial intimacy

Research shows that while over half of the marriages end in divorce, most divorcees cite “disagreements over money” as the biggest reason for their split. As a result, experts suggest that having a clear understanding of where your respective finances are, planning things out together, and embracing transparent financing can help.

Some tips for enhancing financial planning and building financial intimacy include:

Discussing, setting and achieving shared financial goals: When you’re both agreed on a direction you want to head toward, it’s easier to budget, make a budget, track your expenses, and build savings for the future. Initiating conversations might be difficult, but there are some top tips for making things as smooth as possible:

• Avoid discussing money before you go to bed,
• Don’t drink alcohol before discussing finances; it can often make people more disinhibited, leading to less productive financial conversations,
• Make finance conversations a regular occurrence rather than a one-off. This will help you both feel more comfortable discussing money and forging financial plans.

Have an open, honest conversation about single versus joint accounts and what will work best for you both: These days, the split is about 50:50 when it comes to shared bank accounts, with many preferring to keep their finances separate from their partners’ and 49% doing so in order to remain financially independent. Of course, there are pros and cons on both sides. A joint account can help you and your partner keep things all in one place for savings and bills, but it can have wider financial implications, so make sure to think it through. For example, if you enter joint debt together, for example, a mortgage or loan, you’re both liable for the payments.

Equally, if you’ve decided you no longer want a joint bank account after opening one up, there are some tips to follow:

• Be sure to open up a new account first,
• Cancel or redirect direct debits,
• Transfer all your finances, recurring payments/bills and deposits,
• Split your money fairly.

Reach out for financial support: Research shows that financial planning support can help couples gain insight into their finances. Further, those who receive financial planning support are more likely to be unified in their financial decisions, and have more transparent communications about money.

Regularly check in about finances: Making sure to regularly review your financial situation with your partner can be a healthy way to make sure you’re both on the same page; whether that’s regarding individual concerns and anxieties, updating finance goals, or reassessing budgeting.

Decide who will pay for what and how bills will be split: A significant point of contention between couples is often how the household income and spending should be split. Experts have found that around 16% of arguments have their roots in bill contributions. So, to alleviate some of the stress and strain here in relationships, make sure to come up with an agreement that suits you both.

Tags: bank account, Economy, joint bank account, Managing money, Personal finances

Personal finance education in the UK

by Madaline Dunn

Although personal finance is now an educational requirement in the UK, it’s well known the curriculum around this topic is not up to scratch. Many leave school without a real grasp on the ins and outs of personal finance, whether that’s interest rates, mortgages, or managing money, and as a result, research shows this leaves youngsters vulnerable to making harmful decisions around their finances.

Financial literacy empowers people to make informed choices about how, when and where they spend their money, and ensure they’re not left open to unsustainable borrowing, and unwise investments that could lead them down a road of debt.

At The Salary Calculator, we’ll explore why education around personal finances in the UK needs to improve, and the consequences of financial illiteracy.

A lack of financial literacy and its consequences

According to research, we begin to develop “vital money habits and skills” between ages three and seven. Despite this, only around 38% of children and young people receive some form of financial education while in school, and in 2016, half of Brits failed a financial literacy test run by the OECD, placing Britain significantly below France, Norway and Austria.

The consequences of this lack of financial literacy, means that young people are largely unprepared to deal with the different financial situations they are confronted with as they move into adulthood.

Research from Santander UK has even found that two-thirds of young people attribute their debt problems to a lack of financial education. Meanwhile, an inquiry commissioned by the Centre for Social Justice (CSJ) in partnership with Lowell, found that 24 million adults are not confident handling their money on a day to day basis, and one in eight young adults who took on a “buy now, pay later” credit agreement were eventually contacted by a debt collector.

Speaking about what the Santander UK study shows, Mike Regnier, CEO of Santander UK, said that fostering key money management skills at “an early age” will ensure that future generations leave school “equipped with the foundations for financial independence, and the skills to make better financial decisions.”

Meanwhile, John Pears, UK Chief Executive at Lowell, said that now, more than ever, with the cost of living crisis reaching extreme levels, financial literacy would be a “strong barrier.” Pears admitted that as a country “we just aren’t good enough at it,” and outlined that the company’s own customers have outlined how “ill-prepared” they are when facing debt. He added: “The lack of financial literacy and budgeting skills creates spirals of debt that are hard to break and have a long-lasting impact, individually and on our economy.”

Education around personal finance should start at school

The CSJ and Lowell conducted a poll of 4,000 adults and found that 44% of all adults, and two-thirds of those aged 18 to 34, believe that if they had received financial education, for example around basic money skills, they would be more financially prepared for life and its challenges. Yet, in the 2021-22 Young Person’s Money Index report, just 8% of young people said they received most of their financial education at school.

Yet, according to Fintec, when children receive education around finances at school, they’re more likely to handle their finances better, save up frequently, have a bank account and generally feel more confident navigating finances.

Speaking about the advantages of educating children about finances from a young age, Martin Lewis, the founder of MoneySavingExpert.com, said that children are “professionals at learning.” He added: “Teaching children is easier than teaching adults. That’s why, in our education campaigns, we focus on children –  because the job of educating society is so much bigger. If you start with children and keep doing it over 30, 40 years, you’re going to work through [society] better.”

Programs and initiatives to enhance education

Back in 2014, financial education was brought into the secondary school curriculum, as a component of the “citizenship” element of the national curriculum at key stage 3 and 4. This was introduced as a way of providing students with guidance on managing money, and tools to plan for their future financial needs.

However, despite being compulsory, uptake of financial education in schools is actually quite low. According to Russell Winnard, a former teacher and head of programmes and services at Young Money, there is room for improvement in this area. In 2017, he outlined: “It is compulsory in every secondary school, though that does not apply to academies and free schools. Around 35% – 45% of schools were actually delivering financial education in 2014. Two years on and we estimate it’s still only 40% doing so.”

This is something that has been echoed more recently by Martin Lewis who expressed similar sentiments. Speaking to Future Learn, Lewis said: “There is financial literacy on the national curriculum, but it’s guidance rather than compulsory for many schools. It’s only on the curriculum for secondary schools in England. We have a charity called Young Money where we have a free financial education textbook in every school now, and that’s been incredibly successful, but we still have a problem that some schools don’t teach it, aren’t trained to teach it and won’t.”

To tackle the financial education gap, a number of recommendations have been made by CSJ. Some of these recommendations include:

• Introducing a new legal requirement for students to receive “at least three ‘experiential’ financial learning lessons” over the course of their school career;
• A new ‘whole-family’ approach to financial education. According to the report, this would involve bringing in parents and carers into the equation, and introducing what the CSJ called community infrastructure like Family Hubs;
• Bringing in funding for care leavers and disadvantaged young adults to attend ‘just-in-time’ financial education programmes to reduce cases of rent-arrear driven homelessness;
• Introducing adult financial education as part of the Government’s £560 million adult numeracy scheme, ‘Multiply’;
• Completing of the welfare reforms initiated in 2012 by rolling out ‘Universal Support’ to provide vulnerable people with digital and financial skills;
• Promoting the ‘Help to Save’ scheme to increase uptake among those who are eligible.

Commenting on the changes that need to be implemented, Robert Halfon MP, Education Select Committee Chair, said: “We must be bolder – critically, by adding financial education to the curriculum in primary school in PHSE lessons where money management remains absent in England. Adults of all ages also need opportunities to develop critical financial skills throughout their life, whether that be in the workplace, further education or via the welfare system.

Tags: Economy, Finances, Financial education, Managing money, Personal finance