Many people are hesitant when it comes to discussions about money. Sometimes it’s the viewpoint that money is a private matter, and other times it could be that financial issues are held at a distance due to their supposed complexity. Young couples are no different and usually do not discuss their attitudes toward money before marriage.
According to a survey by AIA Singapore, about 87% of married couples don’t see eye-to-eye on how to manage their finances. Disagreeing with their spouses at least half the time, these individuals have differing viewpoints on anything from saving to investing to debt. These disagreements over money are the biggest predictor of divorce, as they are often the most significant sources of conflict within a family.
As a young couple that’s just starting out on their financial journey, here are a few things you have to get in order before you can consider investing for your future.
1. Ensure that Shared Finances are Properly Managed
This may sound obvious as you may be used to settling your own finances, but adding someone else’s money to the mix can result in its own set of complications. The first thing that couples usually do after getting married is to consider if they want a joint account. Before doing that, you should both think about how you want to approach paying the bills, saving for future goals, and handling each other’s existing debt.
One of the most popular ways to manage this is to use the “yours, mine, ours” approach. You and your spouse might continue to maintain separate accounts and credit cards to have a degree of financial autonomy, but a certain percentage of your monthly incomes would go to a joint account for shared expenses. Ideally, personal spending (credit card debt from shopping) would be paid off from your personal account so that the joint account is solely for shared assets like your mortgage, car payment, and such.
In addition to a joint expenses account, couples should set aside enough for a joint emergency fund. Typically recommended to be around 3-6 months of one’s salary, this fund should be in place before couples start thinking about making larger investments. Having this fund ensures sufficient liquidity in the case of an unfortunate circumstance like losing one’s job.
2. Communicate Investment Objectives and Priorities
Once a couple has settled their basic financial obligations, they are ready to discuss investing together in greater detail. Couples should be sure of their investment objectives and their partner’s needs along with their investment style before deciding on an investment. The same survey by AIA Singapore has found that men are more likely to take higher risks when investing as compared to women. It is important to talk to your partner about their risk appetite and how comfortable they would be with higher risk investments such as equities as compared to very low-risk investments like term deposits.
Another important factor to discuss is why each person wants to invest. Do you want to invest to increase your retirement savings, while your partner is focusing on your future children’s education? Different priorities will affect the time frame in which you are able to hold on to a particular investment.
For example, (assuming the investor is in their 30s), investing for retirement lets them take on more risk and make longer-term investments. The time frame for investing to increase funds for education, on the other hand, is more variable depending on the type of school the investor wants their children to attend and their current age. Something with a steady rate of return that’s low to medium risk would probably be a better option.
3. Develop Specific Investment Goals
The last step of this process is to settle on specifics. Developing a workable investment strategy that focuses on your goals should lead to research about different types of investment instruments before you select the one that works best. Your discussion should also include the amount each spouse is contributing, how to split the returns, when should these funds be available, and more. Outlining and quantifying these things clearly is important for preventing disputes while the investment is underway.
Investing as a couple can be simplified if these factors are taken into consideration and put into practice. Frequent discussions about the state of each other’s finances are helpful in ensuring that everyone is on the same page. Both parties should feel heard, understood, and supported when coming to these joint financial decisions, and communication is key to achieving success – both in terms of investing and your relationship.
Read more: Being Married Can Actually Save You Money