When the dust settles after the ceremony, reception and second helpings of tiered wedding cakes, newly married couples in Canada must decide whether to join their banking.
Technically speaking, so long as the couple works together to achieve their goals as a team, they can do joint or separate banking. But, in my experience, the benefits of combining accounts, loans and assets outweigh the drawbacks.
Yes, if the marriage ends, joint accounts can allow for one partner to take off with the couple’s wealth, but that is temporary and would be corrected during the legal separation process. If this worries you, you and your honey should chat through your concerns.
With that settled, are you ready to join your banking?
Too many accounts can be confusing to track and in the worst case, they enable partners to hide money from each other, so stick to the basics. Every couple needs one savings, chequing, and an emergency account. That’s it!
To proactively plan for their retirement, a couple should also have investment accounts. RRSPs and TFSAs are registered individually, but can be managed as one household by a broker or advisor. Each spouse should have one of each. Non-registered accounts are investment accounts that are not RRSPs or TFSAs and those can be held jointly. Non-registered accounts offer different tax advantages than the RRSP and TFSA.
If the couple owns a home, they’ll need a joint mortgage and potentially a joint line of credit as a backup emergency fund.
Saying ‘I do’ to joint banking
The first step when joining finances is to reduce the number of duplicate accounts so that you don’t pay unnecessary fees. Next, ensure you both have online access to all accounts. This can be done in one appointment at your bank.
Then, work to establish a budget you both can stick to. Looking for a template? You can download a free one from MeVest, sign up for Mint.com or YNAB.com.
Lastly, if one partner has significantly more assets or liabilities, create a legal agreement that clearly defines what’s going to happen should your union dissolve.
Generally it is best to keep finances separate when children from previous marriages are involved. That’s because there are typically complex custody considerations. In this case, consult a lawyer to establish a legal framework that protects the couple and their respective children.
At the core of good financial management for any couple is communication. Talking about money at least once a week encourages transparency, allowing a platform to resolve issues and helping couples stick to their budget. I always encourage our clients to start by setting goals together. Then, the couple can establish a plan to achieve them.
However, joint accounts do not fix financial disagreements, which are are rooted deeply in a couple’s value system. So, if there are issues with overspending or lack of saving or financial irresponsibilities, you may benefit from seeing a counsellor.
Truthfully, if you don’t have a prenup stating otherwise, your money is joint in the eyes of the law. So, you might as well pool your resources into joint accounts, and make a plan for your exciting future together.
Lesley-Anne Scorgie is a personal finance author and founder of MeVest.ca