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FromTheInvestEditor

The power of two

Know your partner's financial goals and habits to reap the rewards of being a couple

With Valentine's Day upon us, it's easy to get caught up with romance, gifts and wining and dining but when we work on our relationship with our other half, aspects such as honesty, mutual respect and financial security play a big part.

Finance is a difficult subject for many couples to broach and it takes time before they feel comfortable discussing it.

Still, money issues top the list of grouses between couples, so the conversation should start even before marriage.

Any marriage preparation programme worth its salt would include a session on financial management where couples share their financial habits, concerns and aspirations.

Here are some questions to see if you know your partner's financial attitude. They are also areas where you can work on with your partner.


ST ILLUSTRATION: ADAM LEE

•Are you aware of your partner's financial history and aspirations?

•Do you and your partner have a similar attitude to money matters?

•Are you able to give examples of his or her money habits?

•Do you and your partner discuss finances? How often?

•Do you have disagreements over money? How often?

•Do you have debts that your partner doesn't know about?

•Do you hide spending from your other half?

Here are some financial tips for couples that I've amassed through my 26-year marriage.

1. POOLING RESOURCES

Personally, I believe it is good to have some "me" money so I can make personal purchases or donations without having to explain each withdrawal. Having said that, it's advisable to have joint financial objectives and keep each other updated regularly. This helps maintain mutual trust and ensure that the bigger financial goals are kept in sight.

A colleague who is single once commented that couples should be able to accumulate more wealth because they get to combine their financial resources and share costs. She's right.

The power of two translates to a bigger war chest for property down payments, better access to credit and larger investable sums, which make it easier to build a well-diversified investment portfolio.

Having two monthly pay cheques, for example, provides a layer of security and buffer when leveraging mortgages to invest in real estate.

By combining savings, couples can qualify for premier accounts that come with privileges such as higher deposit rates and wealth accumulation opportunities.

In addition, when it comes to your golden years, couples don't always have the same retirement timetable, especially if they are of different ages. So they can enjoy more flexibility when it comes to staggering their retirements.

2. UNDERSTANDING FINANCIAL HABITS

It helps if both partners understand each other's financial backgrounds, habits, concerns and goals.

Finance experts say that when couples understand the impact of their past money habits, it goes a long way to achieving their financial objectives, be it buying a dream home or starting a family.

This is important as opposites attract, so it is usual to find a saver ending up with a spender. The problem arises if one spouse enters the marriage with a bad debt. If that happens, try to pay it down quickly.

Couples usually have different financial expertise, so the one with more knowledge tends to make the investing decisions. But it doesn't mean that the other partner should be left out of the process.

Involvement is key.

3. JOINT VERSUS INDIVIDUAL ACCOUNTS

This is an interesting issue couples face. There are several permutations. Should both of you maintain your individual accounts? Should you combine and have one joint account or should you maintain individual accounts and have a joint account where each contributes a share that is proportionate to your pay?

There's no one-size-fits-all solution. Do what works well for you and your partner. And depending on the life stage, the solution may differ.

Personally, I believe it is good to have some "me" money so I can make personal purchases or donations without having to explain each withdrawal. Having said that, it's advisable to have joint financial objectives and keep each other updated regularly. This helps maintain mutual trust and ensure that the bigger financial goals are kept in sight.

Since the start of my marriage, I've maintained my own account and I added my name to my hubby's account. When it comes to big-ticket items like property purchases and sending the kids overseas, I would chip in my share using cash and my Central Provident Fund (CPF) money.

Coming from humble family backgrounds, both of us are disciplined savers so, money-wise, we are in sync most of the time, though I tend to take more risks.

4. KEEPING FINANCIAL RECORDS

A good start is to have the family finances tabulated in spreadsheets which are password protected and accessible to both of you. This should include details of bank accounts, fixed deposits, insurance policies, home mortgages, loans, investments and the contact persons of the financial institutions servicing you.

If you have done your wills and Lasting Power of Attorney, keep the documents in a safe place and inform a trusted relative or friend where you keep them.

5. HAVING AN EMERGENCY FUND

Whether you are single or married, it is important to maintain an adequate emergency fund for a rainy day, be it an illness, an accident, financial hit or a job loss.

Financial experts advise you to have enough to cover at least six months' worth of expenses, and more for a single-income family. Doing so provides peace of mind.

6. TAKING RESPONSIBILITY

Women may have made great strides in the area of finance but generally they tend to be less investment-savvy. Lacking the confidence, they are too willing to leave the family finances to their husbands.

As a result, the fairer sex gets sidelined and are usually kept in the dark when it comes to family finances.

But they should pay closer attention to such matters as studies have shown that women live longer than men, earn less on average and retire younger. They are more likely to work part-time and take time out to be caregivers.

Women are also more susceptible to critical illnesses in old age. Hence, divorce or the sudden death of the key financial provider could leave them in the lurch, money-wise. When that happens, they find themselves helpless and usually do not know if they have enough to live on and how to handle the finances.

This is why the Tsao Foundation, together with Citibank, introduced the Citi-Tsao Financial Education Programme in 2008 to equip women from 40 to 60 from lower-income groups with basic money-management skills and help them take ownership of their financial security.

With financial know-how, you will be in a better position to be financially responsible for yourself and your loved ones.

For instance, if you have insufficient CPF monies, you can get your other half to top up your CPF Special Account so that you can benefit from the compounding effect of the higher interest rate. This means higher monthly payouts from your CPF Life annuity scheme in your golden years - and peace of mind.

A version of this article appeared in the print edition of The Sunday Times on February 14, 2016, with the headline 'The power of two'. Print Edition | Subscribe