Young couples opting for separate accounts

An increasing number of young Canadian couples are choosing to keep their fiscal matters divorced, according to a new study by RBC.

The study, which focused on couples between 18 and 35 years of age, reveals that a third (34%) of them keep completely separate bank accounts and financial portfolios owing primarily to the need for financial autonomy and having different financial needs.

“There is nothing wrong with holding separate accounts. The main reason why young couples are doing it is because they want to feel a sense of independence. That’s not a bad thing at all,” says Patricia Domingo, investment and retirement planner at RBC.

She stresses the importance of discussing financial plans that take into account long-term objectives and life events which are crucial to any relationship. “If you are not (discussing that) then you can miss out on quite of a few financial planning opportunities. And it might be a little bit of a rude awakening down the road if you have different perspective on where you want to go financially.”

In times when marriages are tough enough, advisors tend to steer clear of making recommendations about how couples should handle their personal affairs. “My role is to listen to what the client wants to do and not suggest that they should make decisions jointly — or whether they should give up their autonomy,” says Don Macfarlane, a financial planner in Thornhill, Ontario. “If it works for them to do it separately, it’s fine with me.”

The hands-off approach, although tactful, doesn’t detract from the fact that there are distinct pros and cons to couples making financial decisions jointly or otherwise.

“The issue here is that people want to feel independent, and wanting their own privacy when it comes to how they want to deal with their money affairs. And they may have different saving and spending habits,” says Domingo.

Not all financial experts advocate financial separation of couples. “Ideally, if I get both parties at the table, then there is more I can do, and we can look at the coordinated picture,” says Macfarlane. “There is a bit of a disadvantage where both parties operate completely independently for their future.”

By planning separately, couples may not be adopting a long-term position as to how they are going to live in retirement. Domingo agrees there are disadvantages to going it alone, in that joint planning forces the couple to have an open and honest discussion about their spending and saving concerns.

“The advantage to [planning] jointly is that it becomes easier as a family unit to track and streamline their expenses,” Domingo says. “They can then decide the most efficient way to deal with those expenses and jointly contribute to the financial bowl.”

For some couples, the decision to merge accounts is dictated by life events, such as the birth of their first child.

The RBC survey indicates that nearly three-quarters (74%) of respondents want to be more financially independent. The reasons often run deeper than those voiced and admitted publicly.

“May be they don’t want to co-mingle their assets because of the number of marital breakdowns that occur,” says Macfarlane. “If you look at the marriages, one of the primary sources of conflict is money.”

He says couples should seek legal advice on whether they should co-mingle inherited assets. “It is my understanding that those assets, if kept distinct, will not form a part of the common assets in marital breakdown. The same applies to gifts.”

In the end, relationship dynamics of each couple are unique and the decision to hold separate or joint accounts would be guided by these differences. It is a personal decision and not a financial planner’s judgment call.

(03/18/10)