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After a significant breakup, moving forward can feel like being dragged unwillingly to a remote summer camp as a child. You’re not sure you are ready for the long journey and a bunch of new faces.
But one day, quite possibly, thanks to an open heart and positive personal momentum, you may find a new, fulfilling relationship. Today, new relationships often involve new family configurations, representing today’s increasingly modern mix of two loving adults and a combination of children (hers/his/ours), and a pet or two.
Blended families are not so unique that they take anyone by surprise anymore, but living within this family dynamic invites outsiders’ curiosity: How do they make it work? It all depends. Attribute some of the success to that magic elixir of intangible attraction, love, humour and patience, but a healthy portion should be credited to open and regular discussions related to finances between the two parties.
Nice to meet you. What’s Your Net Worth?
An overly aggressive opening line might not get you far in the dating world, but being clear about financial priorities, quirks and realities early on allows both parties the opportunity to blend families from a place of honesty.
While spending differences are easy to spot — especially where kids are involved — before you merge households, it’s a good time to consider if the same spending patterns will sit well with you when your income is added into the mix.
There are multiple financial scenarios to consider with a blended family. Each has their own characteristics: Partners keep their expenses separate, integrate them entirely, or try a hybrid where household bills (rent/mortgage, groceries, utilities) are shared jointly between the couple, but selective expenses for individual kids are covered separately by each parent.
The last scenario may seem like the easiest, but consider the potential inequity in income and experience it can create. The potential for kids to develop a “haves versus have not” feeling is significant. Add in differences in wealth that might exist between the ex-spouses of each partner — who may spoil or spare their children when they are outside the blended home, and a major divide can erupt in your new family just when you are working hard to unite everyone.
If it is feasible, both parties might prefer to share the majority of all costs for all the children in the relationship. In practice this option may have the best outcome overall by keeping every family member “equal.”
Whatever your chosen practice is, engage in frank money conversations before you move in together. Discuss your priorities and wants for your children, including child care, insurance, education, camps, and extra-curricular activities, even weekly allowances.
The State of Your Estate
Hearts heal and memories fade, allowing for loving and supportive new relationships to form, but that’s not to say you should forget lessons you learned along the way.
Remembering your hard-earned money being re-routed to lawyers/therapists/property landlords may not be joyful; however, a long memory can provide an important reminder of the need to get sound legal advice before you move in together, purchase property together, or get married.
Obtain your own, individual legal advice. Blended families and their potential intertwining finances can be anything but straightforward. Have an unbiased and frank conversations with an expert about adding someone to a mortgage or lease, estate planning, and securing any assets you currently have, setting up trusts for your children and potential step-children, allocating any inheritance you might receive in the future from older relatives, delegating your financial wishes at the end of life, updating your will and more.
Armed with all the information you need, you’ll be ready and prepped to have an educated conversation on your estate plans before you sign a lease, mortgage paper or…wedding license!
Speaking of I Do …
Even small weddings and ceremonies can create a wealth of financial issues. Major moments like these for blended families require extra consideration on the state of your new joint finances.
Whether it’s a choice to get married in Tulum, or throw a party and have a friend officiate, what matters is that you are both on the same page. Agreeing to spend more money than you are comfortable with in order to avoid a financial argument is not only unromantic, but can also set you up for problems down the road.
Start with giving yourself enough runway. Consider delaying your ceremony until your family has significant funds saved to cover the major costs. And while you can’t plan for every eventuality, having an opportunity to save for a financial goal may be a good family exercise. If you need help, a financial planner may help organize your assets and set saving goals so you have a realistic timeline for your nuptials.
Overall, talking frankly about finances with your new partner and coming to a family agreement can provide a great financial model for children in the house. Kids get to witness first hand what it is like for couples to work together, and how communication can help families reach important goals.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.