Money Management

It’s probably better to just come clean. 

We all tell white lies here and there to spare people’s feelings, but when you’re lying to your partner about where your money goes, it’s not quite so innocent. It might just be a small omission here and there at first, but this sort of behavior can escalate over time and lead to serious problems.

It’s a lot more common than you think. About 45% of all couples have committed at least one act of “financial infidelity,” according to a recent survey by Bread Financial. Coming clean about this may not be easy, but it could be the right decision for your relationship going forward. Here’s how to do it.

What is financial infidelity and why does it matter?

Financial infidelity is the act of hiding purchases from a partner or otherwise lying about where your money goes. While people of any age can be guilty of this, it’s more common among younger adults. Over half of Generation Z couples admitted to financial infidelity, according to the Bread Financial survey.

Part of the reason it might be more common among this age group is because younger adults, particularly those who aren’t married yet, often have separate financial accounts from their partner. This makes it easier to conceal your spending habits than it is when you have a joint bank account.

Financial infidelity doesn’t always have to mean hiding big purchases, although it can. But it could also mean concealing that you’ve been buying expensive coffees from your favorite cafe every single day rather than using the new coffee maker your partner got you. Or it could mean fibbing a little about how much you spent on the new clothing or accessory you just bought.

These things might seem harmless at the time, but if you do this often, it could lead to serious miscommunication about how much money you have or how long it’ll take you to save for your long-term goals. It could also lead to arguments with your partner if they discover you’re routinely lying about your spending habits.

Most people would agree that it’s probably OK to conceal holiday or birthday purchases from your partner, at least until you’re ready to hand them over. But if concealing your expenses has become a habit, it’s probably best to come clean.

How to end financial infidelity

The first step to ending financial infidelity is to be honest with yourself about what you’re doing and how often it’s happening. If you can’t remember how many things you’ve bought recently without telling your partner, look back through your bank and credit card statements to get an idea.

Then, schedule some time to talk to your partner about what’s going on. Be transparent with them and explain to them that you’d like to communicate more openly about your spending going forward.

Next, figure out a budget that will work for the two of you so you don’t need to hide anything anymore. Start by figuring out how much money you have coming in each month. Then, subtract the money you spend on essentials, like housing, insurance, and groceries. Next, agree on what to do with the rest. You might be saving up for a long-term goal, like buying a home, or you could invest it if you don’t have any immediate plans for that money.

If you have debts, especially ones that your partner didn’t know about previously, make repayment a top priority. Decide whether you’ll pay it down on your own or if you’ll work together and come up with a strategy. You could use a balance transfer card, for example, if you have credit card debt. Or you could take out a personal loan if you prefer a predictable monthly payment.

Be sure to include some money that each of you can spend guilt-free in your budget. You may want to set a monthly discretionary spending limit for each of you. Or you can agree that you’ll get each other’s approval for purchases over a certain dollar amount. Figure out what works best for you.

Finally, know that it might take some time for your partner to get over your financial infidelity, especially if it was severe. Do your best to show that you’re sincere about making a change and give them the time they need to process everything. Hopefully, you can find a way to move past it and develop a better relationship with money and each other.

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A reintroduced “Baby Bond Bill” wants to make it easier for all families to build wealth. 

For many families, saving for their child’s future while tackling everyday bills and rising living costs can be challenging. Many children start their adult years with minimal or no savings, further impacting the racial wealth gap in the country. But the recently reintroduced American Opportunity Accounts Act could help children be more financially prepared as they enter adulthood and help them build wealth. The proposed legislation aims to narrow the racial wealth gap and provide greater opportunity for all Americans.

The American Opportunity Accounts Act could help many families

Originally introduced in 2021, Congresswoman Ayanna Pressley and Senator Cory Booker have recently reintroduced the American Opportunity Accounts Act. The proposed legislation hopes to make economic opportunities a birthright for every American child. This ‘Baby Bond Bill’ would create a $1,000 federally-funded savings account for each child at birth.

The funds would be held in an interest-bearing account managed by the Treasury Department and earn around 3% interest. Additional annual deposits would also be made, depending on family income. Lower-income families could qualify for up to $2,000 yearly deposits and supplemental payments would gradually phase out for families with higher income.

A closer look at how supplemental payments would work

Yearly supplemental payment amounts range from $250 to $2,000, depending on household income. For example, a family of four with a household income of less than $25,100 would qualify for a $2,000 annual deposit per child. On the other hand, a family of four with a household income of $81,575 would only receive $250 in yearly payments per child.

At 18, account holders could access the funds for allowable uses, like paying for educational expenses or buying a home. Below are the proposed household income limits for supplemental payment amounts and the estimated account maturity for an 18-year-old:

The racial wealth gap continues to be a problem

The racial wealth gap in the U.S. has narrowed over time, but continues to be a concern. Recent data from the Federal Reserve Bank of St. Louis shows that the racial wealth gap is significant. Most Black and Hispanic families are less wealthy than the typical white family. In 2019, the median white family owned about $184,000 in family wealth. However, the median Black family owned $23,000, and the median Hispanic family owned $38,000.

Reduced wealth can impact the personal finance situation of families for a lifetime. U.S. families of color are less likely to own various types of assets when compared to white families. Additionally, Black and Hispanic families tend to have more debt.

State baby bond programs are increasing in popularity

This proposed federal legislation could set many Americans up for greater financial success and help to narrow the wealth gap. But will it ever be signed into law? Only time will tell. In recent years, similar state-level proposed baby bond programs have become popular.

Several U.S. states have introduced legislation, while others have successfully passed such policies. Hopefully, additional states will introduce legislation like this to help families increase their wealth and set their children up for financial success.

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That’s actually pretty surprising. 

Ask any parent, and they’ll probably tell you that a big goal of theirs is to set their kids up to do better than they did financially. And in a recent survey by Rocket Mortgage, a good 53% of millennials say they are, indeed, doing better than their parents did at the same age.

One reason for this could be that younger generations are delaying having kids. That means they’re spending less money on childcare and incurring fewer expenses.

But homeownership could also be a reason for millennials feeling more financially secure than their parents. In fact, according to the aforementioned survey, 62% of respondents with a mortgage feel they’re better off than their parents were at the same age. But only 46% of those who rent their homes feel the same.

It’s easy to see why homeownership might lend to more financial stability. But it’s definitely not the only means of getting there.

Renters can attain financial security, too

Interestingly enough, it may have been easier for younger workers to buy a home 20 years ago than it is today. Yes, mortgage rates were high back then. But home prices were more moderate.

As of the end of 2022, the average U.S. home price was close to $300,000, as per the S&P/Case-Shiller National Home Price Index. But 20 years ago, it was around $127,000. And while it’s easy to argue that wages are higher today than they were two decades ago, wage growth hasn’t doubled like home prices have.

In 2002, U.S. median household income was about $42,000. These days, it’s about $71,000. So based on household incomes and home prices, younger workers 20 years ago may have had an easier time, or at least a comparable experience, of buying homes than today’s younger workers.

As such, we can’t necessarily point to homeownership as the main reason so many millennials today feel more financially secure than their parents. And we also shouldn’t make the assumption that renters are at an automatic disadvantage when it comes to attaining financial stability.

Sure, renters don’t have home equity to tap. But they might be saving themselves a whole bunch of money by virtue of not owning homes — and not having to cover the many costs associated with them, from property taxes to homeowners insurance to maintenance and repairs.

A hearty savings account balance could lead to financial security

It’s hard to say why so many millennials feel better off financially than their parents were. But either way, if you want to get to a good place financially, you don’t necessarily have to push yourself to buy a home.

Rather, build yourself a safety net. Have a solid emergency fund with enough money to cover three to six months of living expenses. Start building a nest egg by funding an IRA account or 401(k). And put life insurance in place to protect the people who depend on you for financial support.

Homeownership can be a great thing, financially speaking, for those who can swing it. But it’s not the only way to achieve the goal of feeling good about your financial picture.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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A safe car is a happy car. 

Your typical car has what could be thousands of parts that must all work together in an automotive symphony to perform at its best. By the law of large numbers alone, at least a few of those parts are going to be a bit less efficient or effective than their counterparts.

When the same parts consistently cause issues in multiple vehicles — well, then you might have a manufacturing problem. And when those issues impair the safety of the vehicle, with potentially deadly results, then you typically end up with a recall.

Millions of recalls occur every year

Automotive recalls are surprisingly common. Indeed, millions of vehicles can have a recall in any given year, for everything from buggy software to leaky hoses. In one of the busiest years, 2014, around 62 million vehicles were recalled.

Many recalls are initiated by the manufacturers — likely to avoid regulatory scrutiny — though the National Highway Traffic Safety Administration (NHTSA) can also initiate them after receiving complaints that lead to an investigation.

Car recalls have little to no impact on insurance

Car recalls are generally like any other product with manufacturing defects. That is to say, the manufacturer will fix safety recalls on their own dime. All the vehicle’s owner needs to do is schedule the repair and show up.

Even better, because recalls are usually handled entirely by the manufacturer, you don’t need to get your auto insurance involved at all. You don’t need to make a claim or anything like that. In fact, recalls — or the associated repairs — don’t need to be reported to your insurance agency in any way.

Since your insurance company isn’t involved in the process, recalls shouldn’t have any impact on your auto insurance rates.

Worst case scenario

As with most things, there is a potential exception to your insurer’s noninvolvement: extreme negligence.

If you know about a major safety recall and fail to get the problem fixed, then that issue leads to a crash — especially if that crash has fatal results — the insurance company may have grounds to say you were negligent and deny your insurance claim.

For example, if a safety problem is severe enough, the manufacturer may issue a “Do Not Drive” alert, such as the one put out by Honda earlier this year. If you continue to drive the vehicle without having the recall addressed, any resulting claims could be denied by your insurance on the basis of owner negligence.

While this scenario is extremely uncommon, it’s something to keep in mind.

No downside to addressing recalls

To sum it up: Recall-related repairs are paid for by the manufacturer. Except in rare worst case scenarios, your auto insurance has absolutely nothing to do with your recall.

Together, this all means that the only downside to getting a recall addressed is taking time out of your schedule to take the vehicle into the shop. Considering the downsides of not repairing a recall can be a serious injury or death, that inconvenience doesn’t seem so bad.

There’s even an easy way to see if your vehicle has any active recalls: the NHTSA recall look-up. Simply enter your VIN (vehicle identification number) and the tool does the rest. (You can find your car’s VIN on the vehicle itself — often in the corner of the windshield — or it may be on your registration or insurance card.)

If you find your car has an active recall, address it as soon as possible. All it takes is a phone call to your manufacturer’s customer service line to set up a repair at a local dealer or another approved mechanic.

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