Financial Tips for Newlyweds

Before tying the knot with your significant other, you’ll want to make sure you’re on the same financial page or at the very least understand how each of you deal with finances. While you may have discussed personal dreams, family planning, and philosophies of life, money is a subject matter that many couples leave until the last minute. While you may have a sense of how much you and your partner both earn, what your combined savings look like, and what they like to spend money on, you should find time to discuss some deeper questions as well. For example:

• How do you budget? What items do you each prioritize in a budget?

• Do you and your partner agree on ‘wants’ versus ‘needs’?

• Is there any debt that either of you are not aware of?

• Have either of you had problems with your credit history? What are your credit scores?

• If you have children, will you save equally--or at all-- for their post-secondary education?

Why are these questions important? Going into a marriage with these questions answered can help prevent misunderstandings and disagreements down the line. By pre-planning what you will both prioritize in terms of spending, saving, and debt, you’ll have a solid game plan for life’s unexpected surprises.

For better or worse: joint bank accounts

For many couples, the decision on whether or not to open a joint banking account may seem like a no-brainer. But it’s important to consider the pros and cons associated with this decision.

For couples who don’t have many shared expenses, keeping separate bank accounts may make the most sense. This may also be the best route if there is significant difference in income or personal debt, as each person can then keep track of their own spending, savings, and loans. Autonomous banking can keep any resentment from building up about who is spending whose money or if you’re making the ‘right’ financial decisions on both of your behalves. It can also prevent credit card alerts from unintentionally spoiling any romantic surprises (such as a birthday gift or an impulsive bouquet of flowers). However, with separate bank accounts, you may need more day-to-day communication about which bills will be paid for by whom, and whether you’ll split expenses down the middle.

Some couples may choose to keep accounts mostly separate, but open one joint account for shared expenses, such as rent or utility bills. In this instance, they decide on a predetermined amount of money each person puts into the shared account every month. This can help you and your spouse learn to save together while still maintaining financial independence.

Couples who favour a joint bank account may do so to make it easier to track their budgeting and saving, or to avoid a monthly conversation about the division of resources. If one spouse has a better knack for numbers, they may find it easier to take the reigns and manage the flow of income and bill payments from one account. However, if this one partner claims more control over combined finances, their spouse may feel like they have less of a say over how their own share of the money is spent, which can lead to resentment. At the end of the day, each couple should decide what option is best for them. It is always beneficial for both partners to have a lens on household finances even if one person has a more active role in their management.

The most important thing to remember with a joint bank account is that once the money is deposited, you each have equal access to the funds, and equal responsibility for overdraft protection fees or debts associated with the account. Trust, communication, and shared financial values are key to making this work. And if you’re feeling like a financial check up is in order, you can book an appointment with a member of our team any time.

Something borrowed, something saved

Looking ahead to your long-term goals, you and your partner will want to consider scenarios like buying a home, saving for a major purchase, retirement and debt repayment. Coming up with a strategy that works for both of you and choosing products that make the most of your contributions is a great place to start.

Saving for your first home purchase can be intimidating, especially after the major expenses that come along with a wedding. A great option for you and your spouse may be to open a First Home Savings Account (FHSA), contribute independently, and use these contributions together towards your first home. As one person can contribute up to $8,000 per year, to a maximum of $40,000 over 15 years, this means that your combined contribution limit with your spouse will effectively double your potential savings towards a first home. Learn more about CUA’s FHSA.

When it comes to retirement planning, spousal Registered Retirement Savings Plans (RRSPs) are a great option for couples with one higher earning spouse. In this instance, the lower income spouse is the owner of the spousal RRSP, while the higher income spouse is the contributor.  A key benefit is that withdrawals are then taxed to the account owner, the lower income spouse, at a lower marginal rate. Meanwhile, the higher-earning contributing spouse receives a tax-deduction at the end of the year. This can equalize retirement savings for the couple, though it’s important to remember that any contributions you make to a spousal RRSP still count toward your own contribution limit. Consider setting up automatic funds transfers to your RRSP to grow your retirement savings even faster.

While it’s common to have some form of debt (in Nova Scotia, consumers have an average debt of $20,532, excluding mortgages), bringing a sizeable amount of debt into a relationship can complicate things. Debt can include student loans, car loans or leases, and lines of credit, along with credit card debt. While not all debt is inherently harmful, it’s important to be transparent with your spouse about the state of your personal finances so you can work together to build your shared wealth. You and your partner may decide to pay off high-interest debt first to decrease the amount of interest you pay in the long run. Or, if you’re feeling overwhelmed by the amount of different debts you have, a consolidation loan may be a good option to get back on track. However you choose to tackle debt with your spouse, communication is the key to success.

Another topic to discuss and be transparent about with your partner is each of your credit histories and credit scores. Let’s say that one of your shared goals is to purchase a home – two of the largest factors in qualifying for a mortgage are the applicant’s credit scores and credit histories. It would be very difficult to find out that you do not qualify for a mortgage and are not able to buy a home due to your partner’s credit history, or for your partner to find out about your poor credit score this way. There are lots of ways to improve your credit score before taking that next step, and if you need assistance, it is best to speak to your financial advisor.

Before ‘I do’

The last thing you may want to consider with a wedding on the horizon is whether you and your partner are prepared to sign pre-nuptial agreements. It may not be the most romantic conversation, but financial health relies on preparing for life’s unexpected surprises. While there can be a stigma associated with expecting the ‘worst-case-scenario’ for your marriage, some experts actually believe prenups hold romance within them.

By structuring an agreement, you are ensuring now that both you and your partner achieve financial stability in the event of a separation. If this is something you’re interested in, chat with your partner to see if they’re on board with the idea before scheduling an appointment with your legal and financial advisors.

Happily ever afterthoughts

As you prepare to marry the love of your life, we’ll leave you with a few more financial considerations:

• Remember to tell the Canadian Revenue Agency about your new marital status by the end of the following month after your status has changed (and don’t forget to indicate your new status on your next tax return!)

• Review and consider updating your health, life and disability insurance to include your spouse.

• Update your will, especially your beneficiaries, to account for your new spouse.

• If you’ve taken your spouse’s last name, make sure you alert your financial institution to this change.

As this exciting new chapter begins, remember that you’re entering a partnership; your success relies on how you work together to secure your shared happiness and your financial wellness! If you have any questions or would like a Financial Advisor to help you navigate next steps, you can reach out to a member of our team at info@cua.com or by calling 902.492.6500.

Congratulations and best wishes from our team at CUA.