Creating healthy financial habits for oneself can be hard. Doing so in a relationship, when a couple shares financial responsibility, is even harder, according to Emily Garbinsky, associate professor of marketing and management at Cornell’s Samuel Curtis Johnson Graduate School of Management, whose research focuses on consumer financial well-being. This work includes understanding how individuals and couples make financial decisions – for better or for worse.

Popping the positive illusion

In a recent study, Garbinsky and co-authors propose that one reason people undersave is because they hold the positive illusion of being more financially responsible than they actually are. This work shows that people view their financial responsibility through rose-colored glasses, which can undermine their financial well-being.

“We see a lot of scary statistics about people not being financially responsible, such as the vast majority of Americans not being ready for retirement or not having enough for an emergency fund,” Garbinsky said. “People see these statistics, but seem to believe that must be everyone else. That’s not me, right? I’m doing great. Well, that simply can’t be the case.”

If this is correct, then gently shattering such inflated self-views of one’s financial responsibility may increase saving, as people should become motivated to restore more realistic perceptions of financial responsibility, she said.

“After establishing that people do hold the illusion of more financial responsibility than is actually the case, we developed an intervention to combat this rose-colored bias of their money management,” Garbinsky said. “Through carefully constructed surveys, we triggered participants to recognize their frequent engagement in superfluous spending and cause them to see themselves as not as financially responsible as they thought they were.”

According to the research’s findings, interventions increased saving only when superfluous spending was under one’s control and among those who were motivated to perceive themselves as financially responsible.

“This shows us that when it comes to finances, such as saving and spending, we really have to be honest with ourselves,” Garbinsky said.

Love, lies and money

When it comes to financial responsibility, individuals not only have to be honest with themselves, but also with their partners.

Financial matters are frequently cited as a source of marital conflict and stress. Because relationship conflicts over money are usually more recurrent and problematic, and are less likely to be resolved than nonmonetary issues, they have become a leading cause of divorce.

Looking at the data, Garbinsky said that partners unfortunately are not always honest about their financial behavior – hiding spending, debt and savings from one another. Garbinsky and her co-authors produced the first academic paper that reliably and succinctly introduces, defines and measures financial infidelity, and examines its antecedents and consequences.

Not unlike physical or emotional infidelity, financial infidelity – defined as, “engaging in any financial behavior expected to be disapproved of by one’s romantic partner and intentionally failing to disclose this behavior to them” – has a very negative impact on a relationship.

“One of the main motivations for hiding saving or spending, according to our work, is that couples think they are going to fight about it, and this is a method to avoid such a fight,” Garbinsky said. “However, in the long run, we find it’s detrimental for relationship satisfaction because people value trust and transparency. A member or members of a couple may think they’re doing one thing to protect the relationship, but it ends up hurting the relationship in the long run.”

Consequences of Couples Pooling Finances

One solution for avoiding relationship financial woes that Garbinsky has found through additional research is to pool finances with one’s partner into joint bank accounts.

“We see very consistent patterns, that people who pool their finances are more satisfied in their relationship, and they’re also more likely to stay in the relationship, and less likely to break up,” she said. “The multiple benefits to pooling are clear, from spending money more responsibly through a couple’s shared accountability, on average, to couples being more satisfied in their relationship over time.”

In the paper, Garbinsky and her co-authors analyzed bank transaction records, as well as data collected from experiments in the field and lab, and found that couples who spend from a joint bank account are more likely to choose utilitarian products, versus hedonic products, than those who spend from a separate bank account.

“We found that these different spending patterns are driven by an increased need to justify spending to one’s partner that is experienced when money is pooled together,” Garbinsky said. “If a hedonic product becomes easier to justify, the effect of account type on spending patterns disappears.”

According to Garbinsky, these findings have important theoretical and practical implications for better understanding financial decision-making within romantic couples. This also provides insights into happiness within relationships, as such decisions signal a greater commitment to the relationship by the individuals.

“If restoring perceptions of financial responsibility is primarily about being honest with oneself,” Garbinsky said, “truly the solution for the majority of financial stress we see in relationships is about transparency, and being honest with one’s partner.”

Stephen D’Angelo is a writer and content strategist with the Cornell SC Johnson College of Business.