As romantic relationships progress, partners frequently encounter fundamental decisions regarding the organisation of their personal finances: should they consolidate their finances or maintain them as distinct entities? This is what you need to know before merging finances in a relationship.

43% of Gen Z and 31% of millennials prefer to maintain all of their accounts separate, as indicated by a 2024 survey conducted by Bankrate. This is in contrast to 19% of Gen X and 18% of baby boomers.

Many experts maintain that merging finances can result in increased relationship contentment and overall wealth accumulation, despite these evolving perspectives.

The pros of merging finances

A sense of financial fidelity within the relationship can be fostered by integrating finances. It fosters mutual goals, mutual understandings, and mutual trust while having a sense of achievement to further strengthen relationships.

The consolidation of financial obligations can also facilitate the management of household expenditures and expedite the attainment of common financial objectives, such as saving for a vacation or purchasing a home.

The consolidation of finances can also help to establish sound financial habits which will continue into your relationship and have a positive impact on your dependents.

It can be tricky for couples, but it doesn’t have to be. Setting up an offset account for loans and having a discretionary allowance for each partner can keep spending in check, while allowing you to reduce interest paid on debt and build up savings.

Keeping your own separate accounts can still be maintained through a ‘hybrid method’, while having joint accounts for your goals as mentioned above and then agreeing to amounts that work for each of your circumstances.

The cons of merging finances

However, the situation is not entirely rosy. Disagreements may arise as income disparities become more apparent.

It can also be difficult for a single individual to initiate a significant conversation regarding the inequality of contributions.

If one partner is a spender and the other a saver, clashes are almost inevitable and there needs to be a discussion on financial commitments, goals and alignment of finances before merging funds.

Additionally, financial mismanagement by one partner can lead to significant issues, putting a strain on the relationship if you are not on the same page.

The consolidation of finances can occasionally result in one partner exercising excessive control, which can lead to financial exploitation and this can make it very difficult for someone to put money aside to leave if needed.

What to consider before joining finances

Before entering into a financial agreement, it is important for couples to evaluate their respective income levels and financial capabilities.

You should discuss future financial aspirations to help align both partners’ values and expectations moving forward as well as agreement on commitments.

You may want to consider taking small steps and commitments to start off, like opening a joint account for shared expenses such as groceries and dining out and then increasing your committed amounts as your goals and objectives in the relationship changes.

As the relationship develops, couples can progressively integrate more substantial financial aspects, such as investing together or saving for a home.

Protecting your financial independence

As mentioned a ‘hybrid method’, in which couples keep their own accounts while also having a joint account for expenses they both own.

It’s good to have some incomes and bank accounts combined, and then others to have a separate emergency fund and savings account for both parties.

It’s always keep a few thousand dollars in an emergency account for whatever life throws at you instead of one party potentially having to deal with a large expense in an emergency.

Expert tips for merging finances

Open communication

Open communication is the cornerstone of any financial arrangement. Discuss your financial backgrounds, present circumstances, and future objectives. Transparency regarding debts, income, and spending patterns can mitigate potential misunderstandings in the future.

Set clear goals

Determine why you wish to integrate your finances. Whether it’s saving for a house, preparing for children, or lowering living expenses, having defined goals keeps both couples on track. A template can be found below:

chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://files.consumerfinance.gov/f/documents/cfpb_my-new-money-goal_worksheet.pdf

Create a joint budget

Create a budget that covers all shared expenses. This can help to handle finances more effectively and ensure that both partners contribute equally. You can use the below tool via the following link:

https://moneysmart.gov.au/budgeting/budget-planner

Maintain some independence

Even if you consolidate most of your funds, keep separate accounts for discretionary expenses. This can assist retain a sense of independence and prevent budgetary issues while protecting you if you need to save in order to leave the relationship.

Use technology

There are various apps available to assist couples keep track of their spending and manage their finances. These tools can help couples remain on top of their finances and keep each other informed.

Seek professional advice

Working with a financial advisor can help you gain useful insights and make informed decisions about merging your money. They can also help you create a plan that works for both couples. If you require assistance with this, please reach out to our office located in Oran Park or Baulkham Hills on (02)9188 1547 or simply organise for a callback from our contact us page.

If you enjoyed this article, you may also be interested in the following:

The information in this website and the links has been prepared for general information purposes only by our office and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax, personal or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned on this website, consult a professional financial advisor to consider whether it is suitable and appropriate for you and your personal needs and circumstances.