Key takeaways

 Couples often establish a “household chief financial officer.”

 That may lead the other partner to lose financial literacy, study shows.

 You can bridge the financial literacy gap before the partner needs that knowledge.

Americans’ problems with financial literacy can play out differently for everyone, even members of the same household.

Researchers at CU Boulder and The University of Texas at Austin found couples often grow farther apart in household finance skills and interest in learning those skills over time. In a recently published paper in the Journal of Consumer Research, the researchers found that even a small gap can become a big problem as one partner takes over as “household chief financial officer (CFO).”

“A lot of financial illiteracy comes from the fact that one member of a couple relies on his or her partner to handle the household finances,” said author John Lynch, founder of the Center for Research on Consumer Financial Decision Making at the Leeds School of Business at CU Boulder, which funded the study.

If the household CFO dies or the couple divorces after a lengthy period of time, the non-CFO partner could be left trying to quickly make up those years of financial experience.

But the good news: You can try to assess if this phenomenon is true for your relationship, and if it is, start to bridge the financial literacy gap.

Lynch recommends gauging who makes the household’s financial decisions on a scale of zero to 100. If you are completely responsible, mark yourself at 100. If it’s your partner who holds power of the purse, mark yourself at zero. If you share equally, it’s 50.

Then he suggests each partner answer a few financial literacy questions such as these:

Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy:

  • More than today with the money in this account
  • Exactly the same as today with the money in this account
  • Less than today with the money in this account
  • Don’t know

Do you think that the following statement is true or false? “A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less.”

  • True
  • False
  • Don’t know

Suppose you have $100 in a savings account, the interest rate is 20% per year, and you never withdraw money or interest payments. After 5 years, how much money would you have in this account?

  • More than $200
  • Exactly $200
  • Less than $200
  • Don’t know

Suppose you owe $3,000 on your credit card. You pay a minimum payment of $30 each month. At an annual percentage rate of 12% (or 1% per month), how many years would it take to eliminate your credit card debt if you made no additional new charges?

  • Less than five years
  • Between five and 10 years
  • Between 10 and 15 years
  • Never
  • Don’t know

If your knowledge-level is much higher than your partner’s, Lynch said, “Then it’s time to start bringing him or her into the conversation.”

Originally published May 9, 2018

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