The structure of the typical American family has changed dramatically. According to Pew Research, only 46% of U.S. kids younger than 18 are living in traditional families with two married heterosexual parents in their first marriage.
Blended families – a family consisting of a couple and children from a previous marriage – are now the norm, but these families face increased financial hardship compared to their traditional counterparts.
A recent LoveFamilyMoney survey by Allianz revealed just how much financial strain non-traditional families are under. According to the survey, which included 4,500 respondents ages 35-65 with a household income of at least $50,000, more than half of blended families say they live paycheck to paycheck compared to 41% of traditional families.
Blended families have an average of $158,600 in savings and investable assets compared to $264,300 for traditional families. And fewer than half of blended families say they’re on track to meet their financial goals compared to 60 percent of traditional families.
Moreover, nearly 60 percent of modern families – which includes multigenerational families, single-parent families, same-sex couples, blended families, families with older parents and young children and boomerang families – say they are either “making ends meet,” “struggling financially,” or “poor.” Thirty-six percent of modern families said they had collected unemployment compared to 21 percent of traditional families and modern families were twice as likely to have declared bankruptcy (22% vs. 11%).
There are many reasons for this increased financial burden that modern and blended families are under. For many, an unplanned event such as a divorce, a death or an unplanned pregnancy disrupted their financial planning and led to their current family situation.
At any rate, it’s crucial when starting a blended family to make sure everyone is clear on where the family stands financially, how money should be divided, and what should be done to plan for your financial future. Not addressing the issue can lead to arguments and hurt feelings later on.
Here are eight financial tips for couples starting to build a blended family.
Put everything on the table.
Before you say “I do,” sit down with your spouse-to-be and make sure you’re both clear about what you’re bringing into the marriage. Make sure you know of outstanding debts and come up with a detailed budget for your family moving forward.
Figure out how to handle your accounts.
Many couples comingle their accounts without putting any thought into it. This might not be the best idea.
For some families, it makes sense to keep separate accounts so that you have protection if a former spouse makes a claim against your new wife.
Another option is to establish a joint account for your life together and keep your other accounts separated.
Review your estate plan.
Blended families can add several confusing wrinkles to your estate plan.
Make sure you both document all of your assets and include their value at the time of your marriage. Consult with your attorney to make sure your children and stepchildren will inherit exactly what you intend.
Remarriage can alter child support and spousal support payments whether you’re the one paying or receiving the support. You’ll need to have your attorney review your divorce decree and the laws in your state to determine if your child support will be modified.
Consider signing a prenuptial agreement.
Unfortunately, prenuptial agreements have the stigma of being a precursor for divorce. In reality, signing this legal document is a responsible decision you and your spouse can make to safeguard your assets and the assets you want your children to inherit.
Discuss your family’s financial goals and how to reach them.
Once you have a clear understanding of your new family’s debts and assets, you need to determine what your long-term goals are.
Kids can complicate this process. You might have a son who is about to head to college while she has a daughter that will need braces in a few years.
Establish what you need to do and how much you need to save to have the financial future you both envision. It might be a good idea to seek advice from a financial professional.
Consider your kids’ feelings.
There are many instances in blended families where one child will be at a financial advantage over one of their new step-siblings.
For example, let’s say your new stepdaughter has a wealthy grandparent willing to pay for an Ivy League education while you can barely afford to send your son to state college. Is that going to cause hard feelings if one sibling is receiving more college support than the other?
There might not be an easy way to address this, but you need to work with your new family to figure out how to best support all of your children.
While there are many obstacles to overcome when building a blended family, you shouldn’t let that deter you. Raising a blended family can be the most fulfilling and joyous experience of your life.
But before you rush into a remarriage, you need to be aware of these challenges and plan for your futures accordingly.