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The nearly four in 10 (37 percent) Canadian couples who keep their finances discreet, according to a recent BMO poll, may think so. They opt for his and her funds for a multitude of reasons, including independence, practicality and privacy. But at least one US study shows that couples who keep their money separate are more likely to divorce than those who combine their funds, and a 2014 poll for the Financial Planning Standards Council of Canada found that couples who share details about their personal finances argue significantly less about money than those who are less transparent.â€¨ So what's the best arrangement when it comes to a couple's cash? We consulted the experts to find out the pros and cons of pooling money and keeping it divided, and found the best route to take to maintain both a healthy relationship and healthy finances.
Why should I keep my finances separate from my partner?â€¨
"Having your own money empowers people and eliminates many of the power struggles around money,” says Toni Lepore, a chartered professional accountant, certified financial planner and financial divorce specialist in Cranbrook, BC. It can also create a buffer when partners have different goals or approaches to money, such as one being a spender and the other a saver, she says.
Aren't separate finances linked to arguments or divorce?â€¨
Not necessarily. "Just yesterday, I saw a couple who had a joint account and broke up — she was upset and drained it,” says Lepore. Open communication among couples is a must, as is talking about your budget, reviewing finances together regularly and not hiding things," she says.
Should we open a joint account?
Yes, says Lepore and many other financial experts, who advise couples keep separate bank accounts for discretionary or personal expenses, but also use a joint account to simplify the payment of shared monthly expenses. To make it fair for the lower-income spouse, each partner can contribute an equal percentage of his or her earnings to the joint account, rather than splitting all expenses down the middle. Having a joint bank account can also avoid delays in accessing funds if one spouse dies, say Toronto-area certified financial planners Jennifer Black and Janet Baccarani in their book, Managing Alone: Your Trusted Advisors' Guide to Surviving the Death of Your Spouse. "Doing so ensures that the accounts [in the deceased's name] won't be frozen, meaning the surviving spouse immediately has access to cash for daily expenses.”
â€¨Isn't it cheaper to have just one account?
It's true — having three accounts can involve more bank fees than maintaining just one, but there are no-fee bank options, as well as banks that waive fees when multiple accounts are involved, says Lepore. Also, having separate bank accounts — and credit cards in your own names — limits liability in a situation where one spouse racks up debt. With a shared credit card, authorized users (a.k.a. secondary cardholders) can be held responsible for any unpaid balances, even if they didn't sign the credit card application, warns the Financial Consumer Agency of Canada. Similarly, if most or all of a couple's accounts and bills are registered and paid under one spouse's name, the other spouse may end up with a low credit score, which translates into higher fees and interest on borrowed money.
Is all money accumulated during a marriage legally shared, regardless of whose bank account it's in?â€¨
That's true of earned income, says Lepore. "But if you get an inheritance, win the lottery or have some other windfall and you put it in your own bank account, that money is yours — even if you later split,” she says. "If you put it into a joint bank account, however, it's shared 50/50.”
For more tips about money and relationships, read how to work out financial differences in relationships here.