2023-09-12 21:22:46
Various data suggests that couples benefit from completely merging their finances, particularly with joint accounts, but young people are increasingly moving away from the practice, and many financial experts advise against it. (Photo: The Canadian Press)
Life as a couple is above all a question of sharing, but when it comes to finances, it can become complicated.
Various data suggests that couples benefit from completely merging their finances, particularly with joint accounts, but young people are increasingly moving away from the practice, and many financial experts advise against it.
For partners thinking about how to organize their finances as their lives become increasingly intertwined, there is at least some consistency in the advice in that, whatever the approach, they should rely on open communication and a shared vision of objectives.
“When it comes to money, it’s never just about dollars and cents,” says Stacy Yanchuk Oleksy, CEO of Credit Counseling Canada.
“When couples consider a financial partnership, or even just talk about finances, they have to scratch beneath the surface, they have to go beyond the budget, to ask themselves ‘Who am I with money? How was I raised regarding money? What do I want with this money? What stresses me out about money?” All those interesting, juicy things we don’t like to talk about.”
Broader conversations leading to opening joint accounts could also be a way to improve a relationship, says Jenny Olson, an assistant professor of marketing at Indiana University’s Kelley School of Business.
Ms. Olson led a study published earlier this year that found that joint accounts actually led to better relationships.
“After two years, couples who had opened an account were significantly better off and had better relationship quality.”
The findings go further than previous studies, which only linked joint accounts to better relationships, without clearly determining which came first.
In addition to changing the way couples talk about money, Olson’s study found other potential benefits: reducing hard-to-justify purchases due to increased transparency, and generally saving of the communal nature of a relationship.
“Money is one of the main reasons people get divorced,” says Olson.
“So if you can be on the same team when it comes to money, you know, you’re going to be better off in the long run.”
Not the same advantages for the hybrid
However, the practice of combined accounts seems to be less and less widespread. Ms. Olson cites studies from the past 20 years that found that between 52% and 65% of married couples living together used only joint bank accounts, while 10% to 15% said they had completely separate accounts.
This compares to a TD Bank survey that found 47% of married couples have merged their spending and accounts, while a survey from the bank last year found 49% of millennials had not. no joint account with their partner.
Many couples choose something in between, having a combined account for household expenses, while keeping separate accounts to maintain some autonomy.
But Ms. Olson’s research found that a hybrid approach did not produce the same benefits as fully merged accounts.
“One of the reasons why couples who had a partial merger scenario didn’t do as well is because they sort of had one foot in the door and one foot out. So they weren’t completely involved.”
She adds that there were certainly many circumstances in which it wasn’t the best choice for a couple, such as having children from a previous marriage or business accounts.
However, Yanchuk Oleksy of Credit Counseling Canada still recommends that couples maintain their own accounts to maintain their independence and continue building a credit profile, even if they combine some finances.
“It’s okay to share some, but each partner should have their own checking account, their own savings and their own credit.”
She also points out that while joint accounts could be divided fairly easily under provincial laws if the relationship ended, shared debts or credit remained the burden of both partners even after a breakup, so much discussion Further investigation is necessary before co-signing a loan.
Demonstrate transparency
For those who consolidate certain accounts, she says it’s important to determine the right proportions of each partner’s contribution, and that this reflects their income.
Partners should also clearly determine what the joint account will be used for, whether it’s just for groceries and house payments, or also for personal expenses.
Ms. Oleksy also recommends financial meetings on at least a monthly basis, at least monthly financial meetings, or outings reserved for financial discussions where partners make sure their joint project is working.
Financial planner Natasha Knox, founder of Alaphia Financial Wellness, also recommends partners always keep some spending money.
She believes that joint accounts can increase visibility of shared goals, but that couples with separate accounts can also get an overview of their overall financial situation through spreadsheets or other means.
The important thing is to be transparent, said Ms. Knox.
“Separate money is okay, secret money is not.”
It’s important to listen during basic conversations about money with a partner, even though they can sometimes bring up hard truths.
“You have to listen to your partner, listen to what they have to say and try to be someone they feel confident sharing those things with,” says Knox.
“It is important, when listening to your partner in this conversation, to adjust your own responses to what you hear, to remain curious and open, and to try to resist the urge to scold, accuse or to fear.”
She says that overall, she finds that it’s not so much the bank account setup that determines the outcome, but how the partners discuss money.
“The communication element is a much more reliable indicator, because when people are excellent communicators, they are both committed to transparency and they are both aligned on their goals, it “is a much more important indicator of their entire household, their financial well-being and how things are going, whether they have joint accounts, separate accounts or a hybrid system.”
Ian Bickis, The Canadian Press
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