How to split money with your partner
Is there an ideal way to save or split money with your partner?
I doubt it.
Personal finance can be personal to partnerships and relationships too.
I’ve seen a few articles over the years that discuss this subject, how to split finances with your significant other, but they often fail to acknowledge the huge factor that teamwork and/or constant commuincation has related to maintaining most financial decisions.
Relationships can be complicated at times. Money makes it more so.
I can’t tell how many times my wife and I have discussed money matters over the years. It’s important we do.
By maintaining an honest relationship about our finances, we try to avoid these types of friction:
- But this person makes more money…
- But this person took this trip…
- But what if I want to buy this and you don’t….
I bet for many couples or partnerships, money is a challenging dinner table subject. I recall divisive discussions about money remain one of the top reasons why relationship fail…
Inspired by a few reader questions to me, on a personal basis too, here are my thoughts on how to split money with your partner.
How to split money with your partner
There is no right or wrong in my list below. Here are some considerations when it comes to how to split money with your partner:
Yup, right down the middle.
Whether my wife makes more money than I do (or not), we don’t care.
This approach pools all income, from all sources, regardless of who makes more or less at any given time and splits expenses evenly. That means, we pay for shelter, food, and transportation expenses jointly. We save for trips, regardless of where the income arrived from, jointly.
In our case, this is what we do. We have a joint chequing and higher-interest joint savings account.
It’s easy. Less bickering (!). It works for us. Your mileage may vary.
2) Your acccount, their account, for joint contribution
Not right down the middle, not regardless of income.
In this method, because each partner earns a different amount of income, they contribute a different contribution to shared expenses.
Let’s see how this could play out:
- Keep your individual bank accounts – open a joint chequing account.
- Add your individual incomes together to get your total household income.
- Calculate the percentage of that total each partner makes, say 60% one, 40% for another.
- Add up all the expenses you’ve agreed to split.
- Use the percentages to see how much each of you are responsible for.
Pros and cons to this method, but I guess it could work for some.
3) Split certain expenses
Just as it sounds.
Just like I take care of certain condo chores (I do, honest!), my wife has other chores in our relationship.
In this money splitting exercise, maybe one partner pays for the cell phone bills and the other partner, close to that dollar amount give or take, has a role to ensure the pet supplies are stocked.
I’ve heard about this “I do, they do” budgeting concept in some relationships but it seems too much nickels vs. dimes for me.
4) Pool the income but keep a “me account”
Beyond 50/50, this might be the most popular.
In this money splitting partnership, you pool your income, you pay your shared expenses, and then you also have a “mine vs. theirs” savings account.
The joint chequing account can promote teamwork but the individual savings/spending accounts can leave room for the discretionary I-can-do-anything-I-want-with-my-money account. If there are different spending habits between partners, I could see this being a huge advantage to avoid conflict.
Mark, what if one person makes more money?
Well, you need to work that out 🙂 I think how you split money with your partner really depends on the trust and the dynamics of your relationship.
Here is a reader question, related to this subject (adapted for the site only slightly):
Thank you for all the work you do and information you provide, you’ve given me renewed energy to figure out where my family and I are at with our finances. I think we’re doing well but there’s a huge difference or gap between what’s under my husbands name for saving and investing versus mine.
First question, does this matter? I’m asking since I was a bit late to start my career and begin to build more savings and investments.
We’re both 35. He’s been saving and investing with his company via a defined contribution plan for about 15 years while I’ve only been contributing to my defined benefit plan for about 3 years. There’s obviously a huge difference.
Luckily, he has managed to max out his TFSA and save a large amount in a non-registered investing account.
Meanwhile, I have an RRSP and TFSA account I invest in and RESP account for our son.
We still have long careers ahead of us and hope to add one more to our family. Although I generally enjoy my job, I’m very interested in working part-time. We don’t currently have any debt and are working on
maxing out my TFSA.
Is our situation more simple than I think?
I feel like the defined benefit plan always has me making things more complicated than they are. Any suggestions on articles to read or ideas to share?
Thank you for your time. I’m enjoying following along your journey.
Thanks very much for following along, glad you enjoy the site!
First question to answer, no, I don’t believe it matters. See list of options above. I think you should find whatever saving and investing partnership approach works for you, as a couple I mean, discuss it and stick to that until you need to change it up.
In terms of your husband’s defined contribution pension plan, that’s great – 15 years in. I would just consider investing in the lowest-cost, most diversified equity investments in that plan to better maximize growth over the years. Just know that high priced funds are wealth-building killers. High fees make other people wealthy, not you!
Kudos for your defined benefit plan. I am very lucky to have one too. I have considered my DB plan a “big bond” for many years now and you might also want to consider the same.
In terms of investing priorities, I can’t tell you enough that maxing out both of your TFSAs over the coming years will likely pay off very BIG. I have and continue to max out my TFSA, first, every year.
If you haven’t already done so, consider investing in these low-cost ETFs for your TFSA should you not be ready nor wish to invest in any individual dividend paying stocks like I do!
And this is a good read, too…
Managing the refund well is the linchpin in the RRSP vs. TFSA debate
With longer careers ahead of you, once your TFSA is maxed, you can consider maxing out contributions to your RRSP where that makes sense, to lower your taxable income AND participate in long-term tax-deferred growth.
How to split money with your partner summary
There are many ways to save and invest for your financial future, with your partner too!
But regardless if you’re saving and investing on your own or with a partner, I think the basic formula to wealth-building for the average Canadian / average Canadian couple remains the same:
Image source: https://www.finiki.org/wiki/Main_Page
Your personal or partnered savings goals should be the result of a well-thought out decision, related to short-term and longer-term timelines. I believe when you’re able to commit to something, or someone, as part of a goal, that should increase the chances that you’ll realize it. I hope you do 🙂
How do you split money with your partner? What tips or tricks do you use or have for this reader?
Thanks for reading and sharing.
The first question I would ask this couple is are they in this relationship for the long-term or not.
If not, then keep it separate, but on separation, expect the lawyers to pool ALL the assets’ values (DB pensions included), and look at their respective incomes, and then split 50/50 or something similar based on the duration of the relationship and if they have children (including adopted and step children).
If they are planning to be together for the long-term and both are responsible with money, then go 50/50 regardless of income. The reason to go 50/50 is to setup retirement so their incomes will be 50/50 then. Engage a fee only financial planner to run the numbers and propose where the retirement savings should be going to maximize gains and minimize taxes in retirement.
Based on how we planned our retirement income: until both TFSAs are full, little, if anything, should be going into a non-registered account (in most cases). Also, the person with the smaller DB should have the bigger RRSP, and because of the income difference it should probably be a spousal RRSP. Again, have a professional look a the entire situation.
We went 50/50 from the moment we moved in together – each of the respective incomes and debts became OUR income and debts. My income has always been double to over three times my spouse’s. The difference was never a question, I could bring the money in, but my wife delivered the babies (try putting that into a spreadsheet!).
Thanks, Bob. You’re writing about what some others have eluded to – the trust factor and longevity factor. If partners/couples intend to be together, want to be together, etc. then certainly 50/50 seems advantageous.
I laughed at your comment about spreadsheet 🙂 Indeed!
We always had all accounts except RRSP joined
This is about trust
Marriage without trust doesn’t work
Indeed, great comment.
They always say, you single most important financial decision in your life is who you marry…
So regardless of who is making more money, simply trying to be “fair and transparent” and just pool everything into one pot could work, or it could be a recipe for disaster.
We are a bit of numbers people here and we asses risk as well. So… about 50% of marriage’s fail, an even higher and disturbing percentage of second marriages fail as well.
Make a contract, divide your money and assets out BEFORE you get married. Agree on (ahead of time) how your most important possessions and how any current + future children’s expenses will be divided out in case of a marriage failure. IMO child care should simply be 50/50 regardless of who makes more money after limited to some kind of basic ceiling.
Marriage is no longer what it was many years ago no matter how much it is glorified in movies and culture. It’s become a commercialized transaction, and thus should be treated as such. Sorry if that sounds cold, but people need to protect what they have worked hard for. Or, stay single as an alternative.
How true, Paul!
We like 50/50 here but that doesn’t mean that approach works for everyone. The ability to be on the same page, with your partner, is huge. Otherwise, it will likely fail.
Thanks for your detailed take.
I really like the idea of 50/50. It’s a partnership between equals after all. However, when I got married in my mid-20s, my husband, who was earning much more than me decided that we should have a joint account for shared “regular” expenses and contribute equally (despite his higher salary). It was unbalanced financially, which became unbalanced more generally. Now that I’m in my 60s and am looking for a mate, I am wondering what happens when two “older” people who are “unevenly yoked” financially get together. It’s surprising the number of guys I have met who have become divorced in the past decade or so and have very few assets. I would end up supporting them financially. We couldn’t buy a house together because they couldn’t afford it. Would they pay me rent or would I simply just own the house and they would live for free (except for shared expenses)? One guy said that he would want to become an owner of the house if he did any bit of maintenance on it. Part of the issue is that I want my children to inherit my assets after I pass away. I realize that a good premarital agreement helps in this regard, but there’s still the issue of “his living in a house that I own” which is not a 50/50 situation.
Interestingly, Marie, my wife and I always have had some rather unbalanced income, but only recently have things been more even. That hasn’t bothered her or me one bit – it’s 50/50 here. Always more ours vs. mine vs. yours in our house.
That makes sense – especially in the context of a long-term relationship and, I don’t mean to be gender-biased here, for men to be the higher earner and, consequently, have more assets. The issue arises when it’s the woman who has significantly more assets than the man and it’s a later-in-life relationship. The man might feel emasculated if he feels “taken care of” financially by the woman.
Totally. Definitely an issue for some men, in older generations…!
Never an issue here if/when my wife makes more $$ than I do 🙂 – Bring it!
A very interesting subject and posting Mark!
In our 33 year marriage I made a much higher salary than my wife. We therefore decided that I would pay all the expenses and she would bank her entire pay check and invest it. 25 years later she was able to quick working at the age of 51 and had an investment account of 7 figures which produces significant dividend income. I was able to quit working at the age of 57 and we now enjoy travelling around the world together on a few trips a year. Our TFSAs and RRSPs are all topped up. Her non-registered investment account is 4 times the size of mine and that is not an issue for me. I continue to receive royalty income from previous employment so my income continues to be higher than hers.
I realize this is a unique situation but it worked very well for us and money issues/spending has never been an issue in our relationship. I think you should have mentioned that one higher income spouse can pay all the expenses and the other spouse can invest their after tax income to build up dividend income as an option to split income.
We have similar circumstances in our marriage and income to yours roger. We also put my salary towards all living expenses (via joint chequing and savings accounts) and my wife’s salary towards investments and vacations. The significance difference to your strategy is, after maxing my TFSA and both RRSP accounts, we put the remaining money into a joint (rather than an individual) non-registered investment account. Why only my TFSA? and not my wifes? Well, my wife is American and the US gov. taxes TFSA’s very punitively thus she does not have one (on recommendation of our account). US gov. also treats RESP’s the same way so that account is just in my name. Other than those two exceptions, we believe in 50/50 split all the way. I look after the finances and investments, consult with my wife before making major investment decisions and keep her apprised of minor decisions and status.
Great insights on how and why you do what you do. Another fine example that personal finance and personal relationships should dictate personal circumstances.
Same, Roger. Income was was uneven in our house until recently.
Both of our TFSAs and RRSPs are topped up, and we hope to max out accounts again for TFSAs in another 3 months 🙂
Yes, that is an option, right?? A spouse can invest their after tax income to build up dividend income as an option to split income.
Taxable income attribution rules are hard to track!
All our non-registered accounts are joint (with the exception of her inheritance account from her father). Her account from a tax attribution point of view has her name first on it and her SIN number attached to it. Likewise my account (in joint names) from a tax attribution point of view has my name and SIN attached to it.
So come income tax time I just look at the first name of the account or the SIN number and know who has to claim the revenue on their tax return.
Works well for us and I’ve have been doing this for decades.
We might go that way, too, Roger – joint account and then one name first via SIN with the other name on account as well. I figure we have a bit of time to figure that out as we approach semi-retirement in the coming years. Good insights!
In a marriage it is a partnership and the idea of equality of effort is at the core of this sense of teamwork. Each putting effort into the relationship and pulling together. Therefore it is not fair that one should be wealthier than the other – or reverse one poor in their own marriage compared to the other. All monies should be discussed and no secrecy or privacy in terms of separate accounts. This is the idea of the vows of marriage – but rarely is this level of equality in all matters implemented. Both parties need to know where the family money is, who makes how much, who is spending what. This is real partnership and honesty. This how my grandparents made their marriages work and they ended up very happy living such honest lives. .
Very well put comment, Emma. I suspect many readers might agree with you!
50/50 here for us the last 34 years. Simple.
Trust,common ideas, habits and goals with money make it fairly easy.
I’m going to put that on Twitter 🙂
In 1987 my wife and I counted our change and opened a joint bank account with $287 . Been married since 1989 and never had individual accounts . We now have a corp and semi retired but having a equal say in all financial matters has made things easy . I do most investing but discuss every move with her . As Mark I believe in dividend investing and it has worked great for us . I wish tfsa was around in 1990 .
Great stuff, Jeff, re: joint account.
Yes, I hear ya on the TFSA. Trying to save up my $$ for Jan. 2023 🙂
I suspect the annual contriution room should be bumped t0 $6,500. Thoughts?