Before economist Joanne Hsu's parents retired, they invited their 29-year-old daughter to sit down and examine their financial records.
"They showed me everything -- all their retirement planning. My father wanted to put my mind at ease that they almost certainly would never have to rely on me," Hsu said.
Hsu's mother is an accountant and the person who has always managed the couple's money. "My father used to joke that my mother could leave $300 on the kitchen table and walk out" and he wouldn't know what to do, Hsu recalls.
That's role reversal for most couples in the United States. When Hsu became a researcher for the Cognitive Economics Survey at the University of Michigan, which studies family money management, she was surprised at how unusual her family was. When it came time to choose a topic for her doctoral thesis in economics, she decided to study a related subject: What happens when a wife who hasn't been very involved in a couple's financial decision-making is widowed?
Anecdotes and some statistics available before Hsu began her thesis research suggested that wives don't prepare for the likely death of their husbands -- women outlive men by an average of five years -- and widows don't do a good job of managing money. Hsu's study offered a different view of this situation.
She found that 80 percent of wives who are part of a traditional couple do begin to learn more about the family's money and take over more control of it when their husband's health falters. When they are ultimately left on their own, these wives are likely to be successful managing their money in retirement.
Those widows who don't successfully manage their money are usually hampered by two factors:
- The husband died unexpectedly, leaving them with no knowledge and no time to learn.
- The husband was a poor money manager himself and left his wife with a financial mess.
The obvious lessons from her findings, Hsu says, are that both halves of a couple should be involved in financial decisions. If one of them is the primary money manager, he or she should insist that the other person learn about their situation and be familiar with the day-in-day-out processes of banking and bill paying, as well as knowing how much money they have and where it is.
It also behooves an aging couple to plan for the likelihood that one of them will be left alone. In many cases, that should include asking for outside help and analysis to ensure that resources remaining when one person dies will be sufficient to support the person who is left behind.
If your daughter is an economist, you can just call her.