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How to take finances from mine and yours to ours, at any age
TORONTO, Oct. 28, 2013 /CNW/ - First comes love, and then comes…a joint bank account. Whether a couple is cohabitating in their twenties, getting married in their thirties, or remarrying in their sixties, at some point in any serious relationship the conversation about joint finances will surface. Regardless of life stage, successfully integrating finances requires open and honest communication to determine how to best combine and plan for the future together.
According to research from TD Canada Trust, which surveyed adults in committed relationships, the top three personal finance products that Canadians combine with their partner are a joint bank account (64%), a mortgage (60%) and a joint credit card (50%), compared to only 36% of couples who have a joint financial plan.
"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," said Janice Farrell Jones, TD Canada Trust. "It's important that both parties have a clear understanding of household finances - from day to day spending to long-term savings and investments - and all aspects of each individuals finances - from everyday banking to credit card management - to set the framework for a strong financial future together."
TD Canada Trust provides some advice that may help in maintaining financial harmony when integrating finances with a partner at any life stage:
Combining finances is often a first for many couples in their 20s, whether it's renting an apartment together or working to pay down existing student debt. When and how to share money will always vary depending on an individual couple's financial situation and relationship, but communication is always key.
"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," said Farrell Jones. "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."
Paying down student debt and saving for a home in the future, for example, are common goals for many couples in their 20s. As with any financial goal, it's important to discuss and align on key considerations like timing, affordability and overall expectations. In the case of home ownership, couples should also make sure they agree on whether they are buying for the long or short-term as it will have a financial impact down the road.
Paying down debt, raising kids and saving for retirement - with many financial priorities, streamlining is essential for couples looking to combine their finances in their 40s.
"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."
Some couples may choose to merge certain aspects of their finances, while retaining individual accounts for additional saving or discretionary spending. Whether a couple decides to combine everything, keep everything separate, or somewhere in the middle, it's important that both parties are ultimately working towards the same financial goals.
Likely, many couples in their 60s have a solid financial base, but with fewer peak income earning years remaining, it's important to have a clear picture of what retirement looks like and what it will take, financially, to get there.
"Spending time with the grandkids will have a much different price tag than travelling 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."
Whether married or common-law, couples should also ensure their retirement savings strategy takes advantage of spousal RSP contributions to help reach their retirement goals faster while lowering income taxes now and in retirement.
About the TD Canada Trust Love & Money Poll
TD Bank Group commissioned Environics Research Group (www.environics.ca) to conduct an online custom survey of 4,564 Canadians aged 18 years and older who are currently in a committed/serious relationship. Responses were collected between January 10 and 25, 2013.
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million customers. We provide a wide range of products and services from chequing and savings accounts, to credit cards, mortgages and business banking, to credit protection and travel medical insurance, as well as advice on managing everyday finances. TD Canada Trust makes banking comfortable with award-winning service and convenience through 24/7 mobile, internet, telephone and ATM banking, as well as in over 1,100 branches, with convenient hours to serve customers better. For more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the sixth largest bank in North America.
SOURCE TD Canada Trust
Image with caption: "Ready to say I do to joint finances? Here's how to combine dollars and cents at any life stage. (CNW Group/TD Canada Trust)". Image available at: http://photos.newswire.ca/images/download/20131028_C7218_PHOTO_EN_32576.jpg
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