By Amanda Morrall
How you handle your finances as a couple is a very personal decision. Having learnt the hard way that both marriage and divorce can have a harsh financial impact, my personal opinion is that keeping separate banks accounts is a good idea. That’s despite my feeling that pooling your money and working towards common financial goals is good for your bank account and team building.
Ultimately, the decision is going to be a private one. If I have any advice, and technically I can’t give it, it would be for individuals and couples to think this decision through very carefully, to communicate on the subject of money as openly and honestly as possible and to be realistic about scenarios that might make you uncomfortable.
For example, what would be the consequences of separate or joint finances in the event of one party dying prematurely, or the relationship fizzing, or one party becoming unable to work. I think it’s also critically important to know what your partner’s fundamental views about money are as this would influence how they regard debt and also a lot of other important financial decisions.They may be different from your own but in having this information you can at least learn how to manage your differences.
Ultimately that comes down to effective communication, the foundation of a healthy relationship in my humble opinion. In the early stages of a relationship, it may not seem important but for those relationships that evolve it certainly will -- particularly with finances being one of the biggest marital stressors and leading cause of divorce.
I used to mock pre-marital counselling but I now see the merits of it. If those sessions included a component of financial communication and planning, I’d be urging young couples to get themselves enrolled before getting engaged. Understanding a prospective spouse’s habits, their debts, their goals and the depth of their knowledge about money could be a marriage saver.
Wellington financial advisor Liz Koh, author of Your Money Personality, defines four basic types of money personalities; hoarders, achievers, entrepreneurs and thrill seekers. Her classification system hinges on willingness to take risk. Sorted.org.nz also features a money personality profiler on its Website. It has 16 types. I was interested to discover I am a sensible drifter. I had a laugh, as did my colleagues, but actually the description was fairly apt. Here’s my summary:
“You are not all that fascinated by commerce. To suit your idealism you need investments that you care about and are consistent with your personal inner values. You work harder when you believe your work is important to human kind.”
It’s a bit more detailed than that, but most of it I would agree with.
I would suggest that most people know themselves well enough to know their tendencies and values about money. Money profiling might be frivolous, however if it serves to get couples who are considering co-mingling their finances talking more opening about the subject, then it’s an exercise worth doing as a precursor to more serious discussions about the pros and cons of separate versus joint accounts and money management.
Sorted.org.nz has some excellent resources beyond the money personality profiler to help in this regard. As part of their new makeover, I discovered a few gems into their A-Z section.
Under the planning a relationship section, a list of "Things to consider.''
There's also a useful section for those dealing with separation.
Things to consider
You should know how your financial situation would be affected if the unexpected happens. Here are some things you need to think about:
- Do you have a joint emergency fund? If not, do you have another way to access cash quickly?
- Do you and your partner have a superannuation scheme? What happens to the scheme should you or your partner die?
- If you're making a financial plan for retirement together, will your plans be sufficient if you both live well into your 80s or 90s?
- What happens if you are separated – by death or otherwise – before you reach retirement age?
- Have you considered life insurance or income protection insurance in case you or your partner can’t work?
- If you share a mortgage, will payments be covered by mortgage or life insurance if you or your partner dies?
- Are there debts that either of you are liable for?
15 Comments
We got a joint account within a couple of months of being an item. I was gonna start earning a salary earlier but wanted him to be the one getting the card out when we were out (far more romantic) regardless of where the money came from...
It didn't even occur to me that things might not work out lol, very naive. We've never had personal accounts since and 16 years on, it seems blind trust has worked for us!
Elley - ditto. I took her out for tea, and she paid. Seemed like a good start to me. That was over 30 years ago, and we had less than $50 between us. One account ever since, never an argument over it. Hard to imagine that separate accounts don't suggest separate lives, really.
It would be interesting to run the graph of those who need status symbols to feel good about themselves, atop the one of those who run separate accounts. I suspect there would be a correlation.
Thanks :) According to hubby, the one downside he sees to having only joint accounts is that I know when he's bought me a present and how much it was (quite often before he actually gives it to me thanks to online banking). Telling him I don't need presents doesn't seem to make a difference...
But apart from that, it works fine. I take care of everything financial (and much more, I blame it on being far too efficient and reliable!) and just tell him once in a while what we have and where. Seems to be more than enough details for him.
We have joint accounts, wifey sugessted it (made me do it) prior to marriage (been 10yrs now). I was always kind of against it, but we sit down every now and then, work on a budget.
We take a set amount (Equal) of cash out each week as personnal spending, and the rest is to pay bills/mortgage some put away for holidays, some for the kids future education.it work's fine for us, maybe not others?, as i have always earned more (especially when wife was at home with kids) i kind of always moaned about it, but things are turning around on the other foot now, where the wfie is going to earn more than me, so think I will shut my mouth now...lol
We went to counselling before getting married, best free pyschology course on offer. What some couples learnt about each other was fascinating, and they were going to get married!!
We have always had a joint account, has worked well for past 16 years, pooling resources and having joint financial goals. This lets you get ahead because you don't spend time wondering what if or making value judgements about your partners expenditure.
Sum of the joint is greater than the sum of the individuals.
I.e. prior to marriage wife used to run overdraft (not that she needed to, too much jam jaring), I never had one so having accounts together, there was no overdraft or overdraft interest or fees, savings and accounts were pooled. Reduction in fees and extra interest paid for a meal out every couple of months. You need totreat yourselves with some of the gains.
I think it depends on how financially compatible you are and how much you trust each other. Me and mine are very similar, which helps immensly. But even if you are different you can compensate for this by being realistic in setting a budget together.
When we were newly married we shared a house with my sister. We had a shared 'flat account' for power, rent, phone and most food items. After six months or so we noticed that my sister would buy bread and milk from the dairy at a significant premium over the supermarket which was the same distance away. Neither of us could understand why she would do this, but when we asked her the answer was revealing - about us as much as her. The supermarket was at St Lukes and she said it was impossible for her to go and get the bread and milk and NOT come back with a $75 dollar dress which she 'saved' $50 on. Bread and milk from the supermarket would bankrupt her.
Needless to say, we took over the bread and milk buying when possible, allowed the dairy purchases when we were too busy and were grateful to realise that we had married someone with a similar financial personality!
My parents recently celebrated their 65 years anniversary. Dad passed on his no. 1 secret, it's all to do with "trust and understanding !". Simple he said.. because I don't trust your mum and mum doesn't really understand me...
hence, the same deal for financial affairs.. Honey I don't trust you with my cheque book... Darling I don't understand what you are spending on..."
Common bank accounts are important for feeling your working together on things. Just have to accept and plan for your own individuality. We both have our own pocket/spending money which we zip to our own bank accounts. Money we do not have to answer to each other for is important! We like trips away as a family but also with our own time and friends. She likes NYC with the girls so we plan for that in the budget once a year. Does help not to be on too tight a budget!
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