Blending money in a blended family

You fall in love again. You think about entering into a second marriage and creating a blended family with your two sets of kids. And just when you feel like you are getting a handle on things, the subject of financial matters comes up. Blended families face many challenges, financial challenges chief among them. Deciding if you want a pre-nuptial agreement, figuring out how to proceed when he has set aside education money for his kids and yours have no college fund, or looking at the lifestyle your kids are accustomed to are matters of concern. Uniting blended family finances, however, can be managed, like most other blended family challenges, with compromise, negotiation, and a sense of humor.

Bringing financial harmony to your blended family

Pre-nuptial agreements

Many couples decide to skip the prenuptial agreement unless personal finances are inextricably combined with someone else; feeling that figuring out who gets what if the remarriage fails is a little like looking for the exit before you get through the front door. For most people, a pre-nuptial agreement is entirely unnecessary if you have clear goals, and demanding one is asking for problems.

Separate or joint bank accounts

People marrying for the second time have lived independently, often a long while. Some couples are comfortable maintaining separate bank accounts, but perhaps funding a single joint household account; other couples jointly manage all accounts. Either way can work just fine as long as you and your spouse are open about saving and investing. Investment and other long-term decisions should always be made together.

Written budgets

Writing and using a blended family monthly budget together is the key to handling your money the way you want.  Estimate your annual income and major expenses for the year, and, using a wish list of what you want to do with the money, establish your blended family priorities. A monthly budget helps keep you on track. If he is hoping to redecorate the den, or if she wants to plan a trip for the family, you have a clear sense of whether you can afford it.

Play catch up with college funds

If only one set of kids has money set aside for their college education, reassure them their money is safe, and make saving for their step siblings a priority. It is never fair to take from one set of kids and give to the other; wondering how much they have to lose can make it harder for kids to accept the blended family and their new step siblings and step parents. Make it a point to let your kids know they will be treated fairly.

Fair is not the same as equal

Think fair, not equal. If your daughter gets expensive skating lessons, that does not mean your step son automatically gets a new car. Listen to each child to determine what he or she really needs, without trying to spend exactly the same dollar amount on each. The only time equal is fair is when you spend an equal amount on each child for birthdays or holidays.

Talk with your kids about money

Teach your kids about money and finances. If you cannot afford something they want, tell them so, regardless of what their friends have. All children ought to know that money does not appear like magic for most families, but comes from hard work and diligent saving. Teach them about work and about saving.

Four parents, not two

In a blended family, mom and dad are not the only ones making financial decisions. In a blended family, Mom, her ex-spouse, Dad, and his ex-spouse are often all involved. No wonder the subject of money can become so testy and complicated!  Disagreements about who owes what and what kid needs what come up often in blended families. It is a good idea to be friendly and pleasant with the ex-spouses, because negotiation and compromise are easier when everyone is cordial.

Retirement accounts

Prepare for your life together after work. Being a single parent is difficult financially, and it is likely one or both of you has not been able to save enough for retirement. Look carefully at your retirement accounts. You may want to invest more heavily in one of them to ensure you can retire together and enjoy your grown-up blended family!