Blended Families Face Major Savings Challenges

According to the Allianz LoveFamilyMoney Study, blended families average only $158,600 in savings and investable assets, compared with $264,300 for traditional families (those married to someone of the opposite sex with at least one child younger than 21 living at home). Moreover, a majority (55%) of blended families say they “currently live paycheck to paycheck,” and nearly one-third (30%) cite one of their worst financial habits as “not saving any money,” versus 41% and 20%, respectively, for traditional families.

“The defining characteristic of blended families—which consist of parents who are married or living together with stepchildren and/or children from a previous relationship—is the financial baggage and commitments that they bring from their previous relationships,” explains Katie Libbe, Allianz Life vice president of consumer insights. “Blended families are survivors, but they could be burdened by the past. While children can form warm bonds with the new people in their lives, the financial scenario can be challenging.”

Forty-three percent of blended families agree that, “My spouse/partner or I brought financial baggage to the relationship that’s difficult to overcome.” Additionally, 33% agree that “the lack of adequate financial support from my ex or my spouse’s ex is impacting my ability to save for retirement.” And while 60% of traditional families say they are on track to achieve their financial goals, only 46% of blended families share that sentiment, according to Allianz.

With the outward appearance of a well-integrated and united family front, blended households report to be very individualistic in their pursuit of financial needs and goals. Sixty-eight percent of those from blended families described their family structure and household dynamic as “focused on individual needs/goals.” This could result in blended families having multiple or competing goals, further complicating their family financial situation. On top of that, Allianz says 35% agree that “my spouse/significant other and I have different financial priorities that are difficult to navigate.”

“It’s possible that many in blended families are still picking up the pieces from a previously broken home,” Libbe notes. “This is a burden that they may feel they must tackle on their own—and likely leads to this more individualistic mindset when it comes to goals and needs. As they’re learning to navigate new financial relationships, they are likely trying to avoid repeating mistakes of the past.”

Even though only 32% of blended families say they have excellent or above-average knowledge when it comes to financial planning (contrasted with 44% of traditional families), Libbe suggests there is hope—specifically with the younger generations in the work force. Despite the challenges they face, the study reflects that blended families are doing more than both traditional families and other modern families to teach their children about money.

They’re also talking openly with their kids about their financial situation and working with them to create budgets, Allianz says. Building on that positive behavior, Libbe shares three additional tips to help create better financial harmony:

• Develop strategies for saving and spending – Partners and spouses might come to the spending/saving discussion from very different perspectives, but they must work together to decide where they can and can’t compromise. Individuals can consider developing mock scenarios and asking their partner whether he or she would rather pay down debt or purchase a new vehicle, for example.

• Determine roles and responsibilities – Household expenses are often a main source of friction in relationships. Determine in advance who will pay the bills and how they'll get paid. As long as you both agree that the division of responsibility is fair, it might work well to maintain separate accounts.

• Establish mutual financial goals – Allianz urges blended families to develop a formal plan to help achieve complex financial goals. Reviewing wills and legacy planning strategies with an attorney is a good place to start. Feeling overwhelmed or can't agree? Consider consulting with a financial professional to discuss financial goals.

Libbe says the challenges faced by blended families are considerable, but not insurmountable. “And smart, pragmatic financial planning can go a long way toward making the blending of two households go more smoothly,” she adds.

The Allianz LoveFamilyMoney Study was conducted by The Futures Company via an online panel in January 2014 with more than 4,500 panel respondents ages 35 to 65 with a household income of at least $50,000.

More information about the firm and the new research is available online at http://www.allianzusa.com.