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Don’t take a leap of faith with your finances in 2020

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By Emma-Lou Montgomery, Fidelity Personal Investing, 14 February 2020

Important information: The value of investments can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

2020 is a leap year and according to folklore that means this is the year that women get to pop the question, rather than wait for a marriage proposal. It might all seem a little quaint - if not downright out of touch in today’s modern world - but whether you’re a romantic, or not, it’s a reminder that we’ve come a long way since “days of old” when women had to wait for their prince to come.

With Valentine’s Day here it’s also a good time to make sure that if you’re in a couple you don’t lose sight of your own priorities and your future financial security either. So, here are the golden rules, whether you’re married, co-habiting or just thinking about it.

1. Talk about it

Before you skip merrily, hand-in-hand, down to your local bank branch (if you even have one near you) to open a joint account, it’s important to make sure you are both on the same page. 

Joining your finances is a big step, and so take time to assess whether this is right for you. One thing to remember is that having a joint account could affect your individual credit score. If one of you has a poor credit rating this could impact the amount you are offered as an overdraft and can risk pulling both of your scores down in the longer term.

2. Set the record straight

If you’ve opened a joint account or are thinking about doing so, it could be just because you think it will make it easier to pay household expenses. But it may be wise to discuss the purpose of your joint account a bit further. Will you just use it for household bills? Or will you pay for nights out and other things too? Have a conversation about the purpose of the account before you apply for one, this will help avoid any future misunderstandings when one of you uses the account for a late-night takeaway or an Uber ride home.

3. Who holds the purse strings?

When money is involved it can feel very personal and often a taboo topic, but with a joint account every decision becomes, well, joint. While both of you will be able to manage the account without the other one’s permission (unless you explicitly set that up with the bank in advance) you are also both equally liable for the account and denying knowledge of how the overdraft level was exceeded won’t mean you’re not ‘jointly and severally liable’ to repay it. As joint account holders you have joint responsibility over everything that goes on with the account. So, make sure you keep an eye on your statements and check payments are going out on time. Doing that on a regular basis can make all the difference between staying in the black or edging towards the red.

4. Be prepared

While no one wants to spend too much time thinking about what will happen if your relationship breaks down, it’s important not to go in with rose-tinted glasses when it comes to joining your finances. Indeed, even if you are already co-habiting and have done so for many years, if the worst happens you won’t necessarily have any rights to a share in your partner’s finances or the property you both live in, unless you’ve set it up correctly from the start.  Put plans in place early to ensure you are both protected in case things don’t work out as you’d hoped.
 
5. Don’t put all of your cards in one basket

Having a joint account is very common among couples and can be very useful when it comes to bills or living expenses. However, it’s wise to make sure you maintain a separate account of your own as well, to ensure that you retain some financial independence and both parties are financially protected – should the worst happen.

Let’s face it, no self-respecting woman is going to sit around and wait for her knight in shining armour to come along, so it’s also a reminder to still look after Number One. Even if you’ve found your Prince - or Princess.

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