I would say it’s more likely than not that couples are frequently made up of people that have different spending and saving habits, risk tolerances, and debts. Rarely are two people evenly matched on all financial fronts, so it’s no surprise that sometimes romantic unions can be seriously lopsided when it comes to bank accounts.
Obviously, if one person is financially savvy and the other is not, the person in the couple who is bad with money profits wildly from the union, whereas the dollar-wise partner kind of suffers. Sometimes this is the result of one partner earning more than the other, but usually it’s because one partner is deeply in debt and the other is not, or one partner has tons of savings and the other does not. The financial situation of whatever partner is behind has to be dealt with, but it’s not a deal-breaker.
Mismatched money management styles doesn’t mean you can’t have a happy union, but it does mean there are some additional challenges. Some people resolve these by letting the partner that is “better” with money handle all the finances, but that’s not the right solution.
Why You Need To Keep Saving Even If You’re Sharing Finances With A Partner
1. Your money is YOURS.
You need to care about it. You need to know how to manage it. You need to know how much you need, and how much you have. You go to work ~8hrs per day, 5 days per week, and your job compensates you with money — that is no small investment of your time, effort, and energy, so you better care about what’s coming your way in exchange for it. I’m all about the what’s-mine-is-yours philosophy of marriage, but I also think you have to retain a sense of self, and your cash, in a couple.
2. You need to always have money only you can access.
My fiance and I are all about meshing our finances. We’ve had joint chequing and savings accounts since before we were engaged, and after our wedding, we’re planning to switch to living off of only one salary and banking the other. But that doesn’t mean all our cash is readily accessible by both partners at all time. We have individual savings accounts in our individual names only. This is not necessarily to protect your money from your partner should they ever go on a wild spending spree and leave you penniless (though that is an added perk). What it’s really for is ensuring you have access to funds even if the unthinkable were to happen: ie. your partner dies and you cannot retrieve any cash until the legal red tape is through. This is especially important if your spouse is supporting you. If something were to happen to them, it would be a few weeks or months before you could get access to their money, even if they have named you their beneficiary (and if they’ haven’t, then you’re really screwed).
3. It is in your best interest tax-wise to save in individual RRSPs and TFSAs.
Control of funds aside, it’s to your best advantage to split money into his & hers TFSAs and RRSPs. It’s the only way to get the most bang for your buck, so to speak. A couple together has $73,000 of TFSA contribution room. That’s not small amount of money, and it won’t produce a small return either. You’ll want to keep interest and dividends earned tax-free. Likewise RRSP contribution room is 18% of you and your partners gross incomes. These tax-deferred accounts will let your money grow until you and partner share retirement together. If you’ve already said vows that you’re going to be together forever and ever, why wouldn’t you put your money in the best investment vehicles for your joint retirement?
Additionally, if one partner is the higher earner, he or she can reduce the taxes they pay by contributing to a spousal RRSP. In short, there’s no reason NOT to max out each other’s registered accounts.
4. It is not fair for your partner to do all the work.
Money is stressful, particularly when there’s not enough of it. Dumping the responsibility on one partner is unfair, and can leave one half of the couple feeling overwhelmed while the other is blissfully unaware there’s anything amiss. It’s fine if one partner knows more about how to manage money, but they should extend their skills and explain their strategies to their partners. Your partner can give suggestions, but should never bully you to control where your money goes. Financial planning is a team sport for your household, so try to share the burdens and benefits with each other.
How do you and your partner share money management duties?