Financial Literacy For Spouses
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Introduction to Financial Terms & Concepts + Organizing Your Financial Information

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Financial Literacy For Spouses Course

  • Gain clarity on household finances and accounts.
  • 5 live online sessions, with recorded sessions available for flexible, on-demand viewing.
  • Guidance informed by the steps below.

Part 1: Why Financial Literacy Matter For Spouses

Financial literacy matters for spouses because it empowers both partners to make informed decisions together and reduces the potential for conflict. Here are some key reasons why it's so important:

1. Shared Decision-Making

  • Informed Choices: Understanding budgeting, investments, and debt management allows both spouses to engage in decision-making about large purchases, savings, and retirement planning.
  • Clear Communication: With a common financial vocabulary, couples can discuss goals and priorities more effectively, leading to a more harmonious financial life.

2. Financial Stability and Security

  • Emergency Preparedness: Financial literacy helps couples build an emergency fund, manage unexpected expenses, and protect their future together.
  • Retirement Planning: Being knowledgeable about different retirement plans, pensions, and savings strategies ensures both spouses are prepared for the future.

3. Conflict Prevention and Resolution

  • Reduced Misunderstandings: When both partners understand the basics of finance, they can avoid common misunderstandings about money, which is one of the leading causes of marital disputes.
  • Joint Accountability: Sharing the responsibility of financial planning fosters a sense of joint accountability and transparency.

4. Empowerment and Independence

  • Equal Participation: Financial literacy ensures that both spouses can participate equally in financial discussions, regardless of who traditionally handled money matters.
  • Risk Management: Being aware of the financial risks and how to mitigate them can help protect both partners from scams, overspending, or unwise financial commitments.

5. Building a Legacy Together

  • Long-Term Goals: Whether it’s saving for a home, planning for children’s education, or estate planning, both spouses benefit when they understand how to strategically manage and grow their resources.
  • Estate Planning: Knowledge of wills, trusts, and life insurance policies ensures that both spouses are prepared for any eventuality, safeguarding their family's future.

In essence, financial literacy is not just about crunching numbers. It's about creating a partnership where both individuals feel confident, secure, and prepared to face life's financial challenges together.

Part 2: Key Financial Terms & Concepts

Understanding key financial terms and concepts is essential for making informed decisions about your money, estate, and future. This section breaks down common financial jargon such as assets, liabilities, probate, and trusts into simple, easy-to-understand explanations. For for more information, visit our Glossary Information Hub.

  • An asset is anything you own that has financial value, such as cash, property, investments, or personal belongings.

  • A beneficiary designation is a legal instruction that specifies who will receive assets from financial accounts, retirement plans, life insurance policies, or other assets upon the account holder’s death.

  • Budgeting is the process of planning how to allocate income toward expenses, savings, and financial goals.
  • Cash Flow refers to the movement of money in and out of your household—your income versus your expenses.

  • A checking account is transactional bank account designed for frequent, everyday use, such as paying bills, withdrawing cash, or making purchases.
  • A savings account is a bank account meant for storing and growing money over time, often earning interest while limiting the number of withdrawals.

  • A credit score is a three-digit number (ranging from 300 to 850) that represents your creditworthiness, or how likely you are to repay borrowed money.
  • A credit report detailed record of your credit history, including loans, payment history, credit card balances, and inquiries. It is maintained by the three major credit bureaus (Experian, Equifax, and TransUnion).

  • Cryptocurrency is a type of digital money that exists only online and is not issued by a bank or government. It can be used for purchases or investments and is secured by special computer technology called blockchain.

  • Debt is money that you owe to a lender or creditor, such as loans, credit card balances, or mortgages.

An emergency fund is a savings reserve set aside to cover unexpected expenses, such as medical bills, car repairs, job loss, or home emergencies. Financial experts recommend saving 3 to 6 months' worth of living expenses in an easily accessible account.

  • Estate tax is levied on the total value of a deceased person’s estate before the assets are distributed to beneficiaries. The federal estate tax only applies if the estate exceeds a certain threshold ($13.61 million per individual in 2024). Some states also impose their own estate taxes at lower thresholds.
  • Inheritance tax is imposed on individuals who inherit assets from a deceased person. Unlike estate tax, inheritance tax is paid by the recipient, and it is only levied in a few states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania).

  • An emergency fund is a savings reserve set aside to cover unexpected expenses, such as medical bills, car repairs, job loss, or home emergencies. Financial experts recommend saving 3 to 6 months' worth of living expenses in an easily accessible account.

  • Interest Rate: The percentage a lender charges for borrowing money or the return you earn on savings or investments. It applies to loans, mortgages, credit cards, and bank accounts.
  • Annual Percentage Rate (APR): A broader measure of borrowing costs, including the interest rate plus any additional fees (such as loan origination fees or closing costs). APR gives a more accurate picture of the true cost of borrowing.

  • A liability is a financial obligation or debt that you owe to another party, such as loans, mortgages, or unpaid bills.

  • A loan is a sum of money borrowed from a lender that must be repaid over time, usually with interest.

  • Net worth is the total value of what you own (assets) minus what you owe (liabilities).
  • It is a key measure of financial health and long-term stability.
  • Formula: Net Worth = Total Assets − Total Liabilities

  • A Required Minimum Distribution (RMD) is the minimum amount that individuals must withdraw each year from their tax-deferred retirement accounts (such as 401(k)s and Traditional IRAs) once they reach a certain age. As of 2024, RMDs generally begin at age 73 under the SECURE Act 2.0, though the age will increase to 75 by 2033 for some individuals.

  • A retirement account is a tax-advantaged financial account designed to help individuals save and invest for retirement. These accounts can be employer-sponsored (like 401(k)s) or individually owned (like IRAs).Contributions may grow tax-deferred or tax-free, depending on the account type.

  • The concept that a dollar today is worth more than a dollar in the future because of its potential to earn interest or grow through investments.

Part 3: Common Types Of Financial Accounts

Understanding the different types of financial accounts can help you manage your money more effectively and plan for the future. This section lists common accounts like checking, savings, retirement, and investment accounts, so you can choose the right options for your needs.

  • A brokerage account is an investment account that allows you to buy and sell assets like stocks, bonds, and mutual funds through a brokerage firm.

  • A time-locked savings account that earns higher interest but restricts early withdrawals.

  • Designed for everyday transactions, bill payments, and debit card use.

  • An investment account is a financial account used to buy, hold, and manage assets like stocks, bonds, mutual funds, and other investments to grow wealth over time.

  • A retirement account is a financial account designed to help you save and invest for retirement, often with tax advantages. Examples include 401(k) plans, IRAs, and pensions.

  • Helps store money for future goals while earning interest.

  • A hybrid of checking and savings, often offering higher interest rates with limited transactions.

Part 4: Understanding Account Ownership: Individual vs. Joint Accounts

Understanding the different types of financial accounts can help you manage your money more effectively and plan for the future. This section lists common accounts like checking, savings, retirement, and investment accounts, so you can choose the right options for your needs.

Each type of account has specific rules regarding ownership, taxation, and transferability, so it’s important to choose the right structure based on personal or business needs.

Individual Accounts

  • Owned by one individual; only they can access and control the funds.

  • A business account owned by a single individual operating as a sole proprietorship.

Joint Accounts

  • Two or more people own the account equally, and when one owner dies, their share automatically transfers to the surviving owner(s).

  • Two or more people own the account, but their shares do not automatically transfer to the other owner(s) upon death; they pass to heirs or beneficiaries instead

  • A joint account available only to married couples in certain states; provides survivorship rights and creditor protection in some cases.

Other/Managed Accounts

  • Managed by an adult for the benefit of a minor until they reach legal adulthood.

  • Opened by an executor or administrator to manage the assets of a deceased person's estate.

  • Tax-advantaged savings accounts for medical expenses.

  • Held in the name of a trust and managed by a trustee for the benefit of designated beneficiaries.

You can determine the type of account by reviewing the following:

  • Account Title: The name on the account statement or online banking portal often indicates ownership type (e.g., “John Doe POD Jane Doe” for a Payable on Death account, or “John & Jane Doe JTWROS” for a Joint Tenants with Right of Survivorship account).
  • Signature Card or Account Agreement: The document signed when opening the account specifies whether it's individual or joint and outlines ownership rights.
  • Bank or Financial Institution Records: Customer service representatives can confirm the ownership structure based on internal records.
  • Account Statements: Some statements may specify account ownership type, especially for joint accounts.
  • Beneficiary Designation Forms: For accounts like POD or TOD, checking designated beneficiaries can clarify whether it's an individual account with transfer-on-death instructions.
  • Tax Forms (1099-INT or 1099-DIV): These may list multiple owners if it's a joint account.
  • Online Banking Portal: Some financial institutions provide ownership details in the account settings or profile section.

Part 5: What You Should Always Know About Your Financial Accounts

Keeping track of your financial accounts is essential for managing your money and ensuring your loved ones can access important funds when needed. This section covers key details you should always know, including account types, balances, ownership, and beneficiary designations.

 

Key Details Why It’s Important
Type of Account (Checking, Savings, Credit, Investment, Retirement) Helps understand liquidity, accessibility, and purpose
Beneficiary Designations Ensures assets pass directly to a chosen individual, avoiding probate
Primary vs. Secondary Account Holder (Credit Cards) Primary holder is responsible for payments and credit impact; a secondary (authorized) user can use the card but isn’t legally liable
Who Can Access the Account Determines if a spouse has full access or needs legal authority (joint vs. individual)
Account Benefits (Rewards, Points, Perks) Helps maximize cash-back, travel rewards, and other financial incentives
Fees & Charges Avoids unexpected fees like minimum balance fees, overdraft fees, and ATM charges

 

Part 6: Understanding the Role of Beneficiary Designations

Beneficiary designations determine who will receive certain assets, such as life insurance policies, retirement accounts, and payable-on-death accounts, after you pass away. Understanding how they work ensures your money goes to the right people without unnecessary delays or legal complications.

How To Update Payable On Death Beneficiary Designation Checklist

Use this comprehensive checklist to update your Payable on Death (POD) beneficiary designations.
Learn More

Beneficiary Designation Information Hub

Information about how beneficiary designations work, their benefits, and how to set them up.

Get Additional Information

Articles

payable on death designation

What is a payable on death designation (and how it can impact you and your family).

Financial Literacy For Spouses

Welcome | Module 1 | Module 2 | Module 3 | Module 4

Disclaimer: The information provided on this page is for general informational purposes only and should not be considered legal advice. Please consult with a qualified attorney for advice specific to your situation.