To Consolidate or Not to Consolidate?

People spend months planning their weddings: from what they’ll wear, to what they’ll eat and whom they’ll invite. It’s fun planning a party. Well, actually, sometimes it’s a pain. His mom and your mom don’t get on. Or his dad’s remarried and his mom’s still spitting mad, and you’re wondering if forty-five feet is long enough for the head table. We work hard to juggle the people in our lives to make sure there’s no conflict on our glorious day. But what about the day after? And what if the potential conflict is with the person we’ve just sworn to love for the rest of our lives?

According to research, 57 percent of couples say that money is their most important concern. Couples also report that they fight about money more than anything else. After all, how we’ll deal with our money as individuals, and as a couple once we tie the knot, often contributes to the strength of the ties that bind.

One of the biggest decisions you’ll have to make is whether or not to consolidate your money. When it comes time to set up a joint household, the fact that many people come into their relationships already financial responsible for themselves is something both they and their significant others have to deal with. The tack you take in consolidating your households will be a reflection of how similar or different your circumstances, attitudes, values and objectives are.

If you see yourselves as autonomous, you may choose separate accounts, splitting bills and keeping your money apart. Sometimes couples split their bills 50/50. Sometimes they split proportionate to their incomes. You have to decide what works for you (though my personal belief is proportionate is fairer.) If you can’t agree on this point, give up now!

You may decide to consolidate all your income in a joint account to foster feelings of unity. If you decide on the joint account, remember that all reporting is done in both names, so if one of you has a habit of bouncing cheques, the other’s credit history will be bruised.

You could set up a joint account to cover all household expenses, while maintaining separate accounts for discretionary spending and investing.

The thing to watch for is that you don’t end up with a b’zillion different accounts because you can’t decide how to manage your money. I’ve seen couples paying upwards of $300 a month in bank fees because they have too many accounts and are playing the “transfer game” – moving money from one account to another. That’s just dumb.

At the very MOST, you might have three accounts: his, hers and ours. More than that and you’re just playing a game that’ll end up biting you in the butt in terms of fees, bounced cheques and confusion.

So the next question is this: whose accounts do we keep and whose do we get rid of? Now we step into choppy waters.

People don’t like change. They like to keep things pretty much the way they’ve always been. And the idea that YOU should have to close YOUR account may see distasteful at first. Ya know what? Get over yourself.

We’re talking bank accounts here, not your favorite chair or that ratty tee-shirt you insist on wearing to bed. This is a black-and-white, dollars-and-sense decision. The reality is that neither of your accounts may suit your needs any more. After all, if your branch isn’t close by and you have to use some other bank’s ATM, you could rack up tons of fees. And if your bank charges fees for EVERYTHING – there are alternatives out there that don’t – it’s time to go shopping. And don’t automatically default to the big-name banks. Lots of options exist today, from credit unions to trust companies, from companies with virtually no branches to banks in supermarkets.

It's easy to decide who offers the best savings account. It's the guy who is willing to pay you the most money with the least number of conditions. Look for accounts that pay interest on your lowest balance. And make sure you have access to your money through an ATM network without having to pay an arm and a leg in fees. (Listen, some fee is reasonable. I tell people to budget about $20 a month for all their banking fees. If you can do it for less, you’re a star!)

If the best savings account pays the most interest, then the best chequing account gives you unlimited access to your money at no charge, right? Look for unlimited free transactions, regardless of your balance whether you bank in person, by telephone or internet.

Here are some things to watch for so you’re fees don’t go through the roof:

  • The number of transactions you make: Some accounts let you do as many transactions as you like for a fixed monthly fee. Other accounts limit how many transactions you can make for the fee you pay. And some charge you no fixed monthly fee at all, but ding you on every single transaction you make. Figure out how often you need to go to the bank machine (why you’d have to go more than once a week is beyond me) and then pick the account that works for you.
  • Use the cheapest method of banking: You usually pay less if you use a bank machine, telephone bank or bank online instead of dealing with a warm body.
  • Use the record-keeping option that works best for you: If you want to get your cancelled cheques back every month, you will likely pay a fee.
  • Keep the minimum account balance needed to bank for free or for cheap: Some accounts offer lower fees if you keep a certain amount of money in your account at all times.
  • NEVER bounce cheques. You will pay a whopping fee if you make a payment from your account and there is not enough money to cover it.
  • Banks like to sell overdraft protection as a way to avoid this. OD works like a loan, but you only pay when you borrow money to cover a payment or withdrawal on your account, and the interest rate and fees are usually really high, which is why I think OD is just a stupid. Instead of using OD, set up a minimum you always leave in your account (just pretend it’s not even there) and stay in the black.

The Financial Consumer Agency of Canada has a tool you can use to help you decide on which account will suite you best. Make sure you click on View all Packages so you get the full list of what’s available to you.

I know all those auto-deposits and withdrawals are a pain in the neck to change. But you’re starting a new life together and the sooner you sort out the details the happier you’ll be in the long run. Get off your duff and get organized TOGETHER.

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