No matter when you get married (or make the big move-in), the topic of money will eventually come up. And it should! Having a frank, open and honest discussion about finances with your future life partner is key to the success of any marriage. But depending how old you and your spouse are it can be hard to determine which accounts should be joint and which should remain separate. Priorities change as we get older and that should be taken into consideration. Money is still one of the top five reasons couples split. By combining your finances together in smart ways - that is also age appropriate - you and your partner will be headed to a healthy financial future.
Is Your Financial Plan Built For A Pair?
Recently TD Canada Trust did a survey asking couples about the top three personal finance products that Canadians combine with their partner. They answered:
- Joint bank account (64%)
- A mortgage (60%)
- A joint credit card (50%)
But only 36% of couples have a joint financial plan. Here are some things to consider when your getting married based on your age.
20s and 30s
More couples get hitched during this age than any other. In Canada 147,288 marriages took place in 2008. The average age for brides is 29 years and grooms an average of 31 years. This is a expensive time of life; more than likely couples are carrying a mortgage, paying off student debt, saving for retirement and preparing to start a family - all at the same time.
Janice Farrell Jones of TD Canada Trust says, "Start by discussing debt, saving, spending habits, financial goals, and credit history to determine if there is anything that may affect the ability to secure future loans together.” He adds, "Next, work together to create a household budget that meets the needs of expense and debt management and has a little left over to put towards the collective financial goals."
40s and 50s
At this age many are marrying for the second time. Some have children and other commitments such as having to make child support and alimony payments. Each partner can bring a significant amount of assets to the partnership as well. It’s important to know what each of you own and what debt you carry. "First and foremost, couples at this life-stage should focus on what will make life easier, financially, together," said Farrell Jones. "Consider working with an expert to make sure each individual financial strategy aligns with the other to maximize savings potential and keep all of the household financial priorities on track. Couples can also further streamline by making savings automatic with pre-authorized transfers into a TFSA, RSP and a child's RESP."
60s And Beyond
Many are getting married in their golden years, but this can be one of the most complicated times to merge two lives together. There is no pressure to have kids or live closer to work, but a person is usually at their highest earning potential at this point too. It’s important when combining accounts that you are protecting your retirement plan and looking ahead to the legacy you had planned to leave. "Spending time with the grandkids will have a much different price tag than traveling the world, so alignment on the retirement vision is essential," said Farrell Jones. "If there is not enough saved for the type of retirement a couple wants, they should work with an expert to help determine how much more needs to be saved and ensure each individual financial plan complements the other to maximize savings and investments."
Age And Expectation Gaps
If you and your soon-to-be spouse have a large age gap it is important to determine whose plan will be followed. It's important to discuss when each of you will retire. It's also imperative to know how the partner remaining in the workforce will save for retirement while the other partner is already retired.
A couple I know, who are 13 years apart, have decided the older spouse will work five years longer and the younger will work five years less so they can retire relatively at the same time and enjoy their golden years together. Having a large age gap can have unique challenges when it comes to social and emotional expectation about money.
Farrell Jones says in any age group, "A common first step in combining finances with a partner is a joint account for shared household expenses, and like other aspects of the relationship, communication is key to keeping things harmonious.”