Dr Pushpa Wood advocates better knowledge of money and how to spend it
Venkat Raman
Auckland, March 10, 2024
Young couples in a matrimonial, civil union or living relationship should be aware of the financial implications that such relationships bring in their lives, a financial expert has said.
According to Dr Pushpa Bhardwaj Wood, Director of the Financial and Research Centre (School of Economics and Finance) at Massey University, Wellington, sometimes, financial relationship can be more stressful than personal relationship and create a long-term impact on the lives of people.
Promoting financial awareness
Dr Wood, who has been advocating financial literacy among all sections of the population, was at the Indian Newslink offices recently to discuss the increasing need to promote financial awareness among the younger members of the community, especially those at the threshold of their working lives.
“Young people who are entering into a relationship should discuss their financial future in the light of their dreams and aspirations of their career, family and responsibilities. They should be clear as to what they want to achieve individually and as a couple. They should understand and appreciate that there would be a cost aspect to achieving those dreams,” she said.
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Dr Wood said that young people should also discuss the following issues: How will the plans be funded? What should be the lifestyle based on the qualifications, experience and employment opportunities available? Should the couple have an individual or a joint bank account? Should each person let the other know of their actual income? What is the attitude of the couple towards savings and expenditure?
There are many more practical questions that will arise, she said.
“People starting their lives together should also be aware that the first few years will be hard, that they should save more, which means fewer social outings and other expenses. I have seen couples in a relationship working on different models of finance. Arguments and tension often arise when one person earns more than the other (which is very common) and hence the right to spend more. It would be wise for the couple to arrive at a house budget at the early stage of their relationship so that they can concentrate on larger, long-term issues such as purchasing a house, going on holiday and other projects,” Dr Wood said.
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The Concept of sharing
The concept of sharing (50:50) is the norm and works well in most cases, she added. If one of the partners has a special preference or habit, that person is best advised to pay for that separately (Example: Going to a movie).
Dr Wood that complications and discord can arise when assets start building up and/or when a person brings their own asset (property, cash, jewellery and other items) at the beginning of the relationship or acquires them later.
“In the interest of clarity, peace of mind and continued good relationship, the couple concerned or the individual to seek legal advice as to how the additional asset/s will impact the financial relationship in the future. People can have a pre-nuptial arrangement but again, it is important to have a clear legal position on this issue. People must be able to put their emotional involvement aside and sort out the legalities. I see many cases wherein a partner is left high and dry as the relationship ends. Unfortunately, in most cases the female partner is the victim,” she said.
Same-Sex Relationships
Does the law apply equally to people in the same-sex relationship? Do people in such relationships experience greater stress and disagreement than others?
Dr Wood said that the law would apply to all relationships equally and that she has not seen issues between heterosexual and homosexual relationships.
“I believe the dynamics of each relationship is different. A lot depends on the values that two people bring into the relationship and how they look at the monetary aspect. Understanding is the key to a good relationship. Problems will arise if one person loves to go out, mix and mingle and dine while the other wants to stay at home and save. One person may prefer to have a family and hence save first. There could be friction in such families where one wants to spend, while the other wants to save. It is good to have an open conversation and sort out the matter,” she said.
Dr Wood has always stressed the importance of financial literacy and financial well-being as the goal of every society.
In an earlier interview, she said that teens and young adults need to know how, when and where to use their knowledge about money.
“We need to equip these young minds with the right tools, which should be upgraded constantly as their situations change so that they feel empowered to manage the most vital resource, which impacts every aspect of one’s life.”
Changing behaviours
Dr Wood said that over the last decade, banking and money-related behaviours have changed drastically. The risks are higher and access to money is easier with Open Banking systems.
“That makes it vital to have a better understanding of money, our changing attitude towards financial management and the need to be aware of both the opportunities and precautions that need our attention. Understanding where your money goes is part of proper money management. Most teens spend the bulk of their money on food, clothing, accessories and cosmetics. A solid foundation of financial knowledge allows you to build and maintain a good credit standing and the earlier, the better,” she said.
Dr Wood said that earlier generations have lived with the mindset of ‘First save, then spend’ but, the trend now is to ‘Borrow, Spend, Pay’ and the paying stage causes stress.
Emphasising the need for parents to be good role models and be prudent in their money skills, she said “As the first teachers, we need to ensure our children grow up with healthy money behaviour at home. This includes teaching them about basic ground rules about money at home, which can be strengthened by schools, tested once they go to university and then put in practice once they start working.”
