Financial Infidelity: Secret Spending Costs Couples and Companies

Along with sexual dalliances and emotional dishonesty, add “financial infidelity” to the perils of the modern relationship, according to Boston College Assistant Professor Marketing Hristina Nikolova and fellow researchers who undertook the first systemic investigation into the secretive spending of romantic partners.

As retailers enter the holiday shopping season, the new study identifies “financial infidelity” as a real problem for consumers and companies, according to Nikolova, the Diane Harkins Coughlin and Christopher J. Coughlin Sesquicentennial Assistant Professor of Marketing at the Carroll School of Management.

Partners and spouses more prone to financial infidelity exhibit a stronger preference for secretive purchase options such as using cash; keeping a personal rather than a joint credit card; choosing concealing packaging; and shopping at generic rather than specialty stores, Nikolova and researchers from three other universities report in the Journal of Consumer Research.

Retailers may need to adjust traditional marketing approaches to better serve shoppers attempting to keep purchases quiet, for whatever reason, said Nikolova, whose research explores consumer psychology, in particular how couples make decisions.

“We are entering the biggest holiday shopping season and there are very simple things that retailers can do to boost their sales, such as offering inconspicuous packaging without a brand name or the ability to pay with cash,” Nikolova said. “Our research suggests that these options should appeal to consumers who are prone to engage in financial infidelity. Retailers should recognize that such shoppers do exist and they will probably sneak an expensive coat or a massage amidst the gift shopping they will do.”

Boston College Carroll School of Management Assistant Professor of Marketing Hristina Nikolova and colleagues report in the Journal of Consumer Research that they have identified how to measure consumers’ financial infidelity tendencies and their impact on consumption.

The researchers define financial infidelity as “engaging in any financial behavior expected to be disapproved of by one’s romantic partner and intentionally failing to disclose the behavior.”

“Understanding financial infidelity is important because financial matters are one of the major sources of conflict within romantic couples and prior research has shown that keeping money-related secrets in relationships is a ‘deal breaker’,” said Nikolova.

The team developed the Financial Infidelity (FI) Scale to measure consumers’ financial infidelity proneness, and examine how financial infidelity impacts consumption. The team conducted lab and field studies and analysed bank account data collected in partnership with a couples’ money-management mobile app. App users who scored higher on the FI-Scale were more likely to hide their transactions and hide bank accounts from their partners, researchers found.

Masking spending, shielding accounts, shipping in plain brown boxes, and burying an indulgent expenditure within the receipt from a big-box store are just some of the lengths to which people will go to avoid leaving a trail of illicit spending, according to the report, titled “Love, Lies, and Money: Financial Infidelity in Romantic Relationships.”

These choices are directly relevant to marketers, as the prevalence of financial infidelity among consumers and variation on the trait impacts purchasing behaviors across domains, Nikolova said.

Although there is a lot of research on sexual infidelity in romantic relationships, there has been no research on financial infidelity. “The lack of research on financial infidelity is surprising because financial infidelity is very common among couples,” said Nikolova.

Past studies have shown that 41 percent of married participants who have joint finances with their partners admit to committing financial deceptions and 75 percent reported financial deceit had negatively affected their relationships, according to the National Endowment for Financial Education.

“A few things that couples can do to prevent financial infidelity is to talk more, get on the same page regarding both joint and individual goals they might have, and also budget for some occasional indulgences along the way of achieving their long-term financial goals,” Nikolova said.

In addition to the personal toll, it is critical for companies to be aware that there are consumer segments who are highly prone to financial infidelity, as these segments may impact their bottom lines, Nikolova said. For instance, the recent trend of businesses going cash-free may hurt retailers as some secretive spenders prefer to use cash to disguise purchases.

Retailers may have to go so far as to offer a variety of generic packaging options, absent brand identity, in order to appeal to the financially unfaithful.

Nikolova said she was surprised by the potentially costly conflict between behaviors fueled by financial infidelity and traditional marketing methods.

“The significant impact of financial infidelity on the marketing-relevant consumption behaviors was surprising to us,” said Nikolova, who co-authored the report with Indiana University’s Jenny Olson, University College London’s Joe L. Gladstone, and University of Notre Dame’s Emily Garbinsky. “This suggests that financial infidelity is important not only for consumers and their personal and relationship well-being, but also for marketers and their bottom lines.”

Nikolova said future research will look at how financial infidelity varies across different relationships. Specifically, how it is shaped by the distribution of financial responsibility between partners, decision-making power, and financial communication within relationships.

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