The secret to a happy financial relationship
HARVEY JONES on safe ways to combine cash as a couple
LOVE and relationships are all about sharing. You join hearts, exchange kisses and share intimate moments, but should you do your banking jointly as well?
The decision to open a joint bank account is a relationship milestone, along with a first date, moving in together or starting a family. Yet it isn’t right for everybody.
Every couple has to decide how closely they want their finances mingled, and whether they want to keep a little bit back for themselves.
So how should you handle it? The answer partly depends upon your relationship.
The most common reason – given by four out of 10 in moneysupermarket research – is getting married.
Moving in together or buying a property are also triggers, while some couples want a fair way to contribute financially to joint spending.
Adam Bullock, UK director of Top Cashback says: “Opening a joint account with a partner brings ease and convenience when splitting and paying bills. But it’s a good idea to retain a personal account for your own funds and spending.
“This will give you a financial safety net, should your relationship go wrong.”
It’s always good to talk
Where couples are concerned, it’s always wise to talk about money, says Emma-lou Montgomery, associate director for Fidelity International.
She says: “Whether you and your partner have combined your finances or not, these conversations need to happen.
“You’ll likely have plans or aspirations for your relationship, such as buying a house or starting a family together, but these goals will depend on both of your financial situations.”
Getting into the habit of speaking about money early on in a relationship, even if it’s just about day-today money management, will help prepare you for having more serious conversations about your longer-term finances later down the line.
“Having different approaches to money management can be a really good thing, just as long as you can reach some common ground,” says Emma-lou.
“Combining each other’s habits and attitudes to financial issues can lead to healthier spending and saving routines.”
Find a quiet time to plan your financial goals.
“Jot down the key aspirations you, as a couple, want to achieve and set out a plan of how you’ll get there. Want to buy a new car or go on a lifetime trip abroad?
“Expecting a baby or thinking about growing old together? All these things need thorough financial planning, jointly,” she adds.
Emma Graham, business development director at Hodge Bank, said some couples split responsibilities, with one taking major decisions on issues such as mortgages and loans, while the other handles the day-to-day money issues. This can backfire, though.
“Financial decisions affect both of you and should be made jointly,” says Emma. “With equal knowledge, equal responsibility and equal decision making, things are more likely to be resolved happily.”
Alexandra Price, director of financial planning at Charles Stanley, says couples should also protect each other through sickness and ill health, by taking out life insurance and critical illness cover.
“That way you can continue to look after each other, even if the worst happens,” Alexandra adds.
Whatever your marital status, couples who plan their finances together are more likely to stay together, or fare better if they separate.
Credit warning
James Jones, head of consumer affairs at credit check agency Experian, says if you decide to apply for credit together or open a joint bank account, you and your partner’s credit reports will become linked, known as“financial association”.
With a joint bank account, if one of you applies for credit, lenders will check your partner’s rating, too. So if one of you has a poor credit history, it might not be the best idea.
Discuss how your shared finances will work and consider ordering copies of your credit reports from the three big credit reference agencies, Equifax, Experian or Transunion, and go through their findings together.
James adds: “If the relationship breaks down, ask the credit reference agencies to remove the finan- cial association from your credit report. Otherwise your ex could continue to affect your finances and ability to access credit.”
Joint accounts
Patricia Robinson, partner in the family team at Slater Heelis Solicitors, says most couples have at least one joint account, typically to pay joint housing costs, utilities, grocery shopping and any childcare fees.
“Pooling of resources helps meet joint expenditure and ensures everyday living costs are equal.”
It also offers transparency, as both partners can see what comes in and goes out of the account each month. Troubles start when trust breaks down, Patricia says.
“The risk with any joint account is that one account holder may not be as financially responsible as the other. It can cause major rows if a shopaholic partner blows their partner’s hard-earned cash on luxuries or whims.”
There are no limits on how much either account holder can withdraw.
“If the account goes overdrawn, the bank could pursue either partner for repayment, irrespective of who actually did the spending,” she says.
On divorce, a joint bank account, whether it has a healthy credit or is overdrawn, will be presumed to be a joint asset or liability. Proving otherwise can be difficult.
Beware overshare
You can take teaming up with your partner too far. One in three expects to rely on their partner’s pension in retirement, but they risk financial heartache if the relationship does not last the course.
Almost four in 10 women are counting on their partner’s pension, and almost a quarter of men, the latest research from Hargreaves Lansdown shows.
Senior pensions and retirement analyst Helen Morrissey warned that planning your finances on the assumption you might split is hardly romantic but could save financial heartache in the long run.
“While it makes sense for couples to share financial responsibilities, leaving long-term planning, such as a pension, primarily in the hands of one partner could leave you financially vulnerable in later life.
“Ultimately, you should save under your own steam,” Helen says.
Financial decisions affect both of you and should be made jointly Emma Graham of Hodge Bank
Should you take the plunge?
If you’re thinking of opening a joint bank account, ask yourself the following five questions:
■ Are you comfortable with giving your partner access to your money?
■ Do you trust them to make wise financial decisions?
■ Is your relationship stable and settled?
■ What will you use the account for, primarily?
■ How much will each of you contribute each month?