Young couples and money….

Posted Friday, September 12th, 2014. Filed Under My Daily Dose

I received my Elle Canada magazine yesterday and there was an interesting article about how more and more couples are keeping separate bank accounts – but there are ups and downs (and power struggles) with split finances.

As I am late forties, most of my friends as couples have joined their finances. Of course, this can become a sticky matter if you go through divorce especially if one of the partners is financially irresponsible. This is why I feel it is so imperative to have a financial discussion prior to moving in/getting married/becoming common law. You both need to decide what each other’s beliefs are around money, what the expectations are, what is going to be shared costs and what is not. I caution you from experience DO NOT assume your partner’s views on finance are similar to yours.

There is more than finances when it comes to deciding on joining financial forces. I believe that how you join or choose not to join your finances is also a statement of how you see your relationship. Now I am older so I know I hold different views than a lot of the younger people.

I want to share this article entitled, “The Great Divide” by Sarah Treleaven, Elle Canada magazine, October 2014.

Treleaven begins, The financial divisions and definitions of “yours, mine and ours” are undergoing rapid transition as family finances are shifting from the male-dominated model of previous generations to dual-bread winning couples who typically want to maintain some level of financial independence.

She states that 50 years ago women would not have been able to have and maintain wholly separate accounts. This held true until 1961 as Canadian women were not able to access credit in their own name.

It is different today. Many young women saw their mother’s have to hide purchases or asking for money like an allowance from their father. Today, for young women, monetary self-reliance has become a priority. Women today are increasingly career-focused, marrying later (if at all) and content to continue managing their own finances.

A 2014 TD Bank survey found that Millennials (those aged 18-34) are more likely to open a joint account for shared expenses before marriage than previous generations – yet, like 42 percent of couples of all ages, many are also hanging on to separate accounts, and the key reason is a desire to maintain independence. A majority of young Canadians keep some degree of financial separation from their partners, and a 2010 RBC study found that most use some combination of joint and separate accounts to manage their money – while only 10 percent share all financial products.

In the article a number of couples are interviewed and this is what they had to say:

Kim MacDonald, a 36-year-old social worker in Hamilton, Ont., says that she and her husband have joint and separate accounts to avoid arguments about expenses that the other might consider trivial. The couple has been married since April 2012 and they share an account for household expenses, including groceries, but have separate accounts for things like haircuts, hobbies and clothing.

Sociology professor Rachel Margolis, 32, came up with a more sophisticated division of finances. She and her partner – who have been together for six years – both teach at a university and when they moved in together, they created a spreadsheet to track payments made by each partner. They now contribute to joint accounts for shared expenses, like the mortgage and utilities, while also maintaining separate accounts and credit.

In the article Treleaven says that couples now fight more about money than they do about housework, sex or even snoring – a 2014 Bank of Montreal survey found that Canadian couples are more likely to forgive infidelity than a partner’s financial mismanagement. But research from Jan Pahl, a British sociologist, indicates that when finances are split, women end up taking on a disproportionate amount of family expenses and that expenditures still tend to break down along conventional gender lines. In other words, he pays for the cars and alcohol, and she pays for the kids – even if she makes less money.

Other evidence suggests that commitment can be compromised when loves goes Dutch. Treleaven states, A 2010 U.S. National Center for Family and Marriage Research study of over 1,000 couples found that married couples who do not pool their income are 145 percent more likely to divorce, compared to couples with just a single shared bank account.

Karin Mizgala, co-founder of Money Coaches Canada, cautions that solo accounts can also lead to secret debt – when it’s your savings account, no one watches the balance dip except you. She shares, “Couples who manage money together tend to do it better; it’s much easier to delude yourself when it’s all up to you,” she says. The key to success is communication. To make this work you need to be open and honest.

Harvard University marketing professor and Happy Money co-author Michael Norton reports that couples who pool their finances report greater relationship satisfaction. Norton’s research shows that the more couples combine their finances the happier they are. For example, couples who share 80 percent are happier than those who share 70 percent. This is true even for couples who are dating – the more financial commingling the stronger the intention to marry.

Treleaven interviewed Heather Livingstone, 32, who said that when her and her husband wed in 2007 they kept their finances separate and it caused nothing but trouble. Things changed a few years after when Heather decided to stay home with the first of the couple’s two children. She had to ask her husband for money. Since 2013, the couple has pooled everything into joint accounts, and Livingstone feels more like they are working toward common goals.

As a divorced women I can tell you that being financially self-reliant is so important. The success of your partnership will come down to more than money. And I want women to know that working is only one source of income. If you have invested well or have a trust that pays a dividend this can all become money contributed to the home.

I really like what Gail Vax-Oxlade, a thrice divorced financial consultant has to say, “You cannot be so tied to your partner that you could never find a way to leave, because things happen.” She recommends a joint account for shared expenses but separate savings account and no share credit (other than the mortgage) – but also points out that the only divorce advantage to having separate accounts is that your significant other won’t be able to empty out your account.”

I want to reiterate the importance of every person, male or female, building their own credit rating. Everything is based on your credit rating. For those with solely joint accounts, especially older women who tend to be the supplement on their partner/husband’s credit card(s), if there is a death or divorce or some change you may find yourself in real trouble because you have no credit history and may find it challenging to get a loan, a credit card in your name, buy a home, lease an apartment and so on.

I don’t know the right answer here. I know that when I come together with my future partner, we will sit down and disucss everything. Being divorced means you have already been through the ringer once with finances and you want to avoid doing this again.

I believe there is a hybrid answer – join forces and be a team especially when it comes to the bigger things like your home, children and expense related to that. When it comes to discretionary spending you and your partner may differ. You need to discuss what each of you are comfortable with. I believe, for me, that keeping separate accounts solely can be a sign of not fully committing to the relationship. I know that others feel differently and I respect your views. I do encourage you and your partner to be honest and up front and find what makes sense for you.

If there is one message: make sure you can be self-reliant if need be!

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