Sharing your life with someone is a big step, but sharing your finances is potentially even bigger. While it’s easy to fall head over heels into a relationship, it’s very important to keep a level head when it comes to joining your finances together. Recent research found that 67% of those in a couple now have a joint bank account, and quickly adapt to sharing finances and swapping personal details without a second thought. But if you’re going to do this, it’s crucial to make sure you’re on the same page from the start.
Following the announcement from ONS that co-habiting couples are the fastest growing family type, up 25.8% over the decade, the news that Boris Johnson and Carrie Symonds are living together at Number 10 has become a symbol of modern life.
Emma-Lou Montgomery, Associate Director at Fidelity International has pulled together top tips on how couples can join their finances together and still remain financially independent in the event of a relationship breakdown.
Talk about it: Before you merrily skip, hand-in-hand, down to your local bank branch (if you even have one near you) to open a joint account it’s important to make sure you are both on the same page. Joining your finances is a big step, and so take time to assess whether this is right for you.
One thing to remember is that having a joint account could affect your individual credit score.
If one of you has a poor credit rating this could impact the amount you are offered as an overdraft and can risk pulling both of your scores down in the longer term.
Set the record straight: Research found that 50% of couples who opened a joint account did it because it makes it easier to pay household expenses. Discuss the purpose of your joint account, will you just use it for household bills? Or will you pay for nights out and other things too? Remember, it’s not just your money in the account. Have a conversation about the purpose of the account before you apply for one, this will help avoid any future misunderstandings when one of you uses the account for a late night takeaway or an uber ride home.
Who holds the purse strings: When money is involved it can feel very personal and often a taboo topic, but with a joint account every decision becomes, well, joint. While both of you will be able to manage the account without the other one’s permission (unless you explicitly set that up with the bank in advance) you are also both equally liable for the account and denying knowledge of how the overdraft level was exceeded won’t mean you’re not ‘jointly and severally liable’ to repay it. As joint account holders you have joint responsibility over everything that goes on with the account.
Make sure you keep an eye on your statements and check payments. This can make all the difference between staying in the black or edging towards the red.
Be prepared: While no one wants to spend too much time thinking about what will happen if your relation breaks down, it’s important not to go in with rose-tinted glasses when it comes to joining your finances. Indeed, even if you are a couple that is co-habiting and has done so for many years, if the worst happens you won’t necessarily have any rights to a share in your partner’s finances or the property you both live in, unless you’ve set it up correctly from the start.
Put plans in place early to ensure you are both protected in case things don’t work out as planned.
Don’t put all of your cards in one basket: Having a joint account is very common among couples and can be very useful when it comes to bills or living expenses. However, it’s wise to make sure you maintain a separate account of your own as well, to ensure you retain some financial independence and to make sure that both parties are financially protected – should the worst happen.