JOHANNESBURG - There is a lot of truth in the old expression: “When poverty comes in the front door, love goes out the back door.”
But it’s not just poverty that can ruin your relationship. All disagreements about money - what to spend it on, how much to save, who pays for what - can lead to stress and even a break-up, if not addressed appropriately and in time.
“One of the biggest questions couples face when they’re thinking about getting married or moving in together is whether to open a joint bank account or maintain separate bank accounts,” says Lizl Budhram, head of advice at Old Mutual Personal Finance. “This conversation becomes even more important and sensitive when one partner earns more than the other.”
Budhram believes there’s a strong case for maintaining your financial independence and having separate bank accounts. “Pooling your monthly income in one account can lead to disputes over individual spending patterns and cause unhappiness in a relationship,” she says. “A joint bank account can also create problems if one spouse dies, because the account is frozen until the estate is wound up, leaving the surviving spouse to face possible financial hardship in the interim.”
However, when it comes to household expenses, Budhram believes it may be wise to open a joint bank account into which each partner contributes an amount proportionate to their salary.
“In other words, the person earning the most should contribute the most. And who pays for what and what is paid for jointly needs to be discussed and decided upfront.”
Budhram offers seven tips for couples who are thinking about opening a joint bank account.
1. Know your financial status. Before you commit to a joint account, even if only for shared expenses, speak to your partner about your financial status. Be open and clear about your individual debt (loans, car repayments, store cards), debit orders and any family obligations. Have a realistic plan in place to reduce your debt and reach out to an accredited financial adviser if you need help.
2. Do the research. It can be surprising how loyal people can be to their own individual banks. Look at the type of bank accounts on offer and consider the value-added benefits as a couple. Compare prices, especially transactional costs, and make sure the features suit both of you. Consider linking your joint accounts to a free app like 22seven that categorises your spending, so that you have a clear view of where your money is going.
3. Get into budgeting. Decide upfront who pays for what. Get into the habit of drawing up a budget together, so that there are no surprises at the end of the month. Programmes like Old Mutual Rewards make it easy to access free templates online - and you’ll be rewarded for using them.
4. Set savings goals. Identify your big joint goals and purchases - from your own home to a new car or a holiday - and then together set specific savings goals and work out how to achieve them. The earlier you start, the less you will need to set aside each month to achieve your desired goals.
5. Be clear on your priorities. If your attitudes to money and your spending habits are very different, you could experience a lot of stress unless you prioritise together. Some people are spenders, and some are savers. It’s important to arrive at a compromise that balances the joy of living in the moment with the need to save for tomorrow and for a rainy day.
6. Know your level of money savviness. When you enter a relationship, you bring your own experience in managing money. It’s important to acknowledge and understand each other’s thoughts when it comes to money. Leverage your partner’s strengths and know which areas you, personally, need to work on. Online courses like Moneyversity are a good way to increase your money savviness.
7. Beware of cyber risks and behave responsibly. With a joint bank account it’s key that each partner understands the risks. Protect your passwords, and personal and online banking information. Use secure devices, don’t share your PIN and use additional safety precautions like two-factor authentication.
Communication is key
Budhram says relationships are about much more than money, but poor money habits can undermine trust and cause havoc in a relationship.
“When it comes to managing money as a couple, there is no one-size-fits-all method. As a couple, you’ll need to find what works best for you and your unique circumstances and preferences. The most important consideration for finding an optimal solution is open and honest communication.
"Conversations about money matters are often avoided, which creates potential for misunderstanding due to different spending and savings habits, and deep-rooted differences in views on money and finances.
“Support each other emotionally as well as financially by taking responsible steps towards a financially secure future together,” she says.