Six steps to money matrimony

Six steps to money matrimony

Getting married involves a real change in how you deal with day-to-day life, and your finances are just one component of this. If you’re heading down the aisle in the near future, there are some important financial decisions you and your partner will need to make.

The Relationships Indicators Survey from Relationships Australia found that 71 percent of couples believe money concerns are more likely to push them apart than bring them together. Rather than take the risk, make sure you consider these issues before saying “I do”.

Open up lines of communication

Although it may sound like a cliche, being open with your partner can make a real difference when it comes to your financial future. A survey from YourTango.com found that in 65 percent of divorce cases, a lack of communication is cited as the main reason for the separation.

Debt is also a deal breaker for many couples. RateCity research found 49 percent of women would give their man the flick if they discovered he had substantial debt but are not forthcoming with their own debt – with just over half of the surveyed participants claiming they’d disclose their personal debt to their partner.

You both need to be willing to talk about money, as knowing where you stand right from the start will help you better understand each other’s views and intentions.

Set up a budget

Budgeting skills are essential at any stage of life, but perhaps even more so once you’re married. If you’re moving in together for the first time, then you are both likely to find it difficult to adjust to the new financial situation.

One way of keeping problems at bay is to establish a budget. This means weighing up how much money is coming in and what your bills equate to, before deciding how much you need to save.

Establish financial goals

Having financial objectives in mind can have a real impact on how you view your financial situation. For example, if you’re thinking of applying for a home loan in the near future, then your savings goals might need to be higher than if you’re saving for new appliances.

Financial institutions recommend saving at least a 20 percent deposit on a new home. This way, you can put yourself in a strong position with lenders, while avoiding lenders’ mortgage insurance.

Financial independence

Getting married is also a good time to discuss whether you’re likely to hold a joint savings account or merge your finances once you’re hitched, or keep your money separate, at least for the time being.

There are advantages and disadvantages to both. Relationships Australia asked people with individual accounts why they had decided to this, with the main reasons being because they hadn’t had time to merge their finances, while others wanted to be more independent.

Taking out insurance

Taking out insurance is something that many couples decide to do once they’re officially married. After all, it makes sense to protect each other and any extended family you might have if the worst should ever happen.

There are so many different types of cover available that it’s a wise idea to weigh up each of them individually. For example, you might find that life insurance is the right option for you, or that income protection cover would offer you the greatest peace of mind.

Build an emergency fund

It’s good to have a financial safety net in place, which is something you should both work towards. This will come in useful whenever you need money at short notice, such as if your property requires emergency repairs, or you suddenly need to buy a new car.

Westpac advises that saving just $10 a week will start to add up, giving you $500 to fall back on at the end of the year. However, there’s no reason why you can’t be more ambitious with your savings goals!

Read on for our simple guide to getting financially ready to start a family.

Did you find this helpful? Why not share this article?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about savings accounts

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.