They share meals, the same bed and a tube of toothpaste, but when it comes to bank accounts, many young couples prefer to keep it separate.
One-third of Canadian couples between 18 and 35 keep separate bank accounts and financial products, according to a new poll of just over 1,700 people conducted for the Royal Bank of Canada. The poll, by Toronto consulting firm Decode, found that only 10 per cent of couples in that age group share all their finances.
About half of those who keep separate accounts cited the desire for financial independence, while 30 per cent said they had different financial needs from their partner.
Although experts agree the decision to team up financially shouldn't be taken lightly, they also warn that being unaware of a partner's money situation can lead to problems down the road.
Tom Hamza, president of the Investor Education Fund, said young couples should follow three important steps if they want to have a successful financial future: Understand each other's money styles; and become educated about money. “You don't want to uncover the depth of peoples' financial habits after you're married,” Mr. Hamza said. “Talk about it as if you're talking about your life plan in general.”
Bottom line: Every couple has to figure out what works for them. Here is how three couples manage their finances:
Amber Yake and Eric Harding
A couple for five years, they lived together for a year in Kamloops, B.C. Currently, Mr. Harding is working as a welder in Fort St. John, B.C., the couple's hometown. Ms. Yake is working part-time in Kamloops as an account assistant and is about to graduate from university. When they lived together, they kept separate bank accounts and split all expenses, such as rent and utilities, down the middle. A few years ago, they created a joint savings account for miscellaneous items, emergencies or big-ticket items. The account is being used to help the couple save for a trip to Europe this summer.
How it's working
Ms. Harding said it's important that they both contribute equally to living expenses so that no one feels as if they have ownership over the home. She wants to maintain financial independence and said that no matter what happens in the future, she hopes to always have her own money. “I can see us joining our accounts a little bit more … [But] I would always have my own bank account,” she said.
What the expert says
It's a good idea for couples to keep finances separate until they have decided to make a lifelong commitment, Mr. Hamza said. Combining finances is a serious move and there's no major advantage in doing it until the time is right.
Kelly and Eric
The couple, who asked that their last names not be used, will be married this year and own a house together. Both are teachers living in Boston, and contribute a similar amount each month to a joint chequing account, which they use to pay their mortgage and taxes. They also maintain separate accounts that they use for their own car expenses, clothing and gym memberships. They alternate paying either the utilities bill or cable bill each month and take turns covering groceries and restaurant bills. When it comes to the house, Eric pays smaller, more frequent expenses, while Kelly handles larger bills.
How it's working
Kelly said the system works well because they earn similar salaries and divide expenses fairly. They both like having access to their own money, but discuss all major purchases. Kelly said her strength is saving, while Eric has student loans and more car expenses. She also tends to get stressed out about daily expenses, so it makes sense for Eric to handle those items while Kelly focuses on saving and handling large expenses.
What the expert says
Home ownership and marriage are major steps that can have major financial consequences, so couples need a good sense of each other's resources and goals, Mr. Hamza says. Newly married couples often take time to work out each other's styles and it is wise to make a gradual transition toward fully blended finances.
Tim and Rhea Stobbes
This Regina married couple's centre of financial activity is their shared chequing account. Their salaries go directly into the account and they use it to pay for groceries, household expenses, bills and items for their two children, including their education fund. In their early 30s, the couple also keep separate high-interest savings accounts that they use to save up for long-term purchases.
How it's working
Mr. Stobbes said merging finances forces two people to talk about financial issues they might otherwise avoid. He and his wife have also learned a great deal about how the other spends and saves – he is more of a long-term planner, while she has a knack for practical day-to-day issues. “You're kind of, bluntly putting it, standing financially naked in front of the other person,” Mr. Stobbes said.
What the expert says
Mr. Hamza is a major advocate of putting financial cards on the table and talking in depth about money matters early on. Sharing accounts also creates transparency and avoids consumer-debt surprises. Identifying goals, creating a budget and knowing where are going will likely alleviate tension down the road. “If you take the time to understand what you should be thinking about in the future and put a plan together for it, you'll remove the ambiguity that causes all the stress,” Mr. Hamza said.
