Combining Finances as a Couple 

Combining finances with your spouse may sound like a daunting task. Some couples may not even consider it an option. Because so many people are meeting online now, there is more potential for romance fraud. While romance fraud is a worst-case scenario, its very existence increases the worry of what could happen should you merge finances with a partner. 

As more women gain financial independence, they are becoming an increasingly important contributor to their household’s income. Because of this autonomy, some women may be hesitant to open a joint bank account with their partner for fear of losing that freedom. This is especially true for younger women. In a 2018 report from Bank of America, it was found that 72% of partnered or married millennials have combined finances. This is a dramatic decrease from previous generations who were closer to 90%. 

Though some may feel apprehensive about it, combining finances with your significant other can be beneficial to your relationship. A recent Stockholm University study found that it can result in both better communication and a stronger foundation. Having a joint bank account creates a sense of openness within your relationship. Having the ability to review your joint bank statements may help you feel confident in your partner’s ability to manage their finances. This can then result in a more trusting dynamic between the two of you. In fact, the study found that couples with shared finances have fewer finance-based conflicts.  

No matter what the circumstances are, it is always wise to carefully assess both yours and your partner’s financial situation. That way, you can make an informed decision.

This week, we’re addressing what you should consider before combining finances.

Questions to ask yourself before combining finances

Whether you are married or not, it is important to ask yourself: 

  1. Does my partner have loans or balances on their credit cards? 
  1. Do they frequently use their overdraft? 
  1. Does my partner have a poor credit score? 
  1. Do they have problems with debt? 

If you answered ‘yes’ to any of the above, you may want to reconsider opening a joint bank account. This is because you will have equal liability. For example, if your relationship ends and you decide to close the account, your bank can refuse to do so until the debts are settled. If you have any doubt at all, there is no harm in keeping your finances separate until you feel confident that your partner has gained financial stability.  

If you do decide to combine finances but still want to retain some of your financial independence, you may decide to keep a personal account. It is always advisable to have a back-up plan. If your relationship were to come to an end, you then have the safety of falling back on your own funds that you kept out of the joint account.  

Contrastingly, if you decide not to combine finances and keep them separate instead, the two of you can still work together towards a united vision for your financial future as a couple. 

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What about combining investment accounts?

You will also need to consider your investments when making financial decisions with your spouse. If you have each been investing individually, you will need to determine how you will manage your investments moving forward.  

Tradition has been for married people to combine everything. While it may seem appealing to combine investments, as it would result in an inflated portfolio balance, it is not always advisable to do so.  

There are both advantages and disadvantages to combining your investment accounts. One advantage is that it would make managing your money together easier. Combined investments also mean fewer accounts and less fees.  

On the other hand, combined investments could be a source of friction. This is particularly true if both of you have strong differing opinions on how the money should be invested. For example, if you have a low tolerance for risk but your partner enjoys taking on more risky projects, this could be an issue and create a strain on the relationship. Additionally, if you were to split up, you may disagree on how to divide your shared investment accounts. 

If you ultimately decide to keep your investments separate, remember that you will still be able to add one another as beneficiaries to your individual accounts. While your beneficiaries would not be able to contribute to these accounts, knowing they would have access to your funds should anything happen to you may provide you with a sense of security. 

Consult with an expert

When making any sort of large decision around finances, it is crucial to consult with a professional. They will consider both yours and your partner’s needs and help you come to the best decision for your situation.  

If you have any questions about savings or investment plans, schedule a free consultation with a Wealth Manager today. They will devise a plan based on your combined goals and risk tolerance, which will relieve you of any unnecessary pressures.