Millennials & Money: What Every Couple Needs to Know About Splitting Money

You know that stage of a relationship when the little things suddenly become the norm — dinners together, Sunday Fundays together, grocery shopping together.

These are signs of a relationship progressing. (YAY, congrats!) But suddenly everything costs twice as much — food, events, activities, etc.

Sure, you might be on an honor system.

“I’ll get you next time,” you say.

But is that really the best way to keep track of how much each person has spends?

And that’s just the beginning: What about when you move in together? Who is supposed to pay for what?

If you’re considering taking the plunge and splitting finances with your significant other, there are multiple strategies, risks and situations to consider.

We spoke with a few experts to get to the bottom of exactly what splitting finances means — and how to figure out if it’s the right decision for you.

How Millennials are Splitting Their Finances With Significant Others

Believe it or not, millennials aren’t hesitant to share their finances with partners.

TD Bank’s 2016 Love and Money survey revealed that 37% of millennials ages 18-34 who are in relationships combine all their finances, while 32% of them combine at least some of their money.

TopCashback personal finance expert Natasha Rachel Smith attributes this to the fact that millennials are pretty open about money.

“The truth is, millennials are much more open to discussing finances with a spouse than any other generation,” said Smith.

The Love and Money study found that 74% of those surveyed ages 18-34 talk about money once a week or more, compared to 54% of those 55 or older.

“Millennials value cohabitation and communication, and that often translates to sharing keys to an apartment and openly discussing budget and fiscal responsibilities,” said Smith.

3 Things to Discuss Before You Split Your Finances

If you’ve found the one — who you won’t be marrying for quite some time, since you’re a millennial — you might be wondering if it’s time to take the plunge and split your Bennies. Are you ready?

Emily Bouchard, a money coach and managing partner at Wealth Legacy Group, outlines three questions for you and your partner to discuss before you throw all your money into one giant pot:

1. How Well Do We Talk About Money?

According to Bouchard, couples should be comfortable sharing detailed financial information about with each other.

“If you’re not one of those couples, combining your money is not a good idea,” she says.

2. What’s the Money for?

Knowing where your money will go before you combine it can prevent confusion in the future. Bouchard recommends defining crystal-clear expectations and developing a spending plan before sharing money. This way, you’re on the same page about what you’ll use that money for and when.

3. What are Your Partner’s Spending Habits?

You know how you spend your money. But what about your partner’s spending habits? If they’re frugal and you’re a super spender, there may be trouble down the line. Bouchard says the more similar your spending styles, the more likely you are to be successful in sharing finances.

How Exactly Will You Split Your Finances?

So, you’ve decided to split your finances. But how much will each person contribute?

Some couples split their money right down the middle, whereas others split it in proportion to their incomes.

James Pollard from TheAdvisorCoach.com gave The Penny Hoarder a great example of this strategy:

“If Person A makes $100K per year and Person B makes $50K, then Person A should contribute double the dollar amount to the joint account.”

In some cases, the individual who contributes less financially might pitch in more in other ways.

Mika Pritchard-Berman, a user experience researcher at Google, told us how she and her previous boyfriend used this strategy.

“[He] made twice as much as me, so we split the bills according to the ratio of income we made. For example, our rent was $1,500. He paid $1,000, and I paid $500. However, I did the majority of cooking and cleaning.”

If you don’t have the same income as your significant other, incorporating a similar strategy can help you both feel like you’re breaking even.

Should You Have a Joint Account?

According to TD Bank’s Love and Money survey, 51% of coupled millennials have at least one shared bank account. Meanwhile, 40% of millennial couples share at least one credit card account.

There are two ways to share a credit card: adding authorized user or a joint account holder.

Here’s the difference:

An authorized user is someone the cardholder allows to use the credit card. However, they are not responsible for making payments.

Julie Pukas, head of U.S. bank card and merchant services at TD Bank, says this can be a great tool for those looking to build or repair their credit.

For example, if you have great credit, but your partner’s isn’t so pristine, opening a credit card and adding them as an authorized user could help bring their score up, given that you make the payments on time. These accounts do show up on an authorized user’s credit report, even though they aren’t responsible for payment.

There are risks associated with this type of joint account. Pukas says that the account owner should make sure the authorized user is responsible about using the card to avoid putting their credit scores at risk.

Joint account holders share the payment obligation to the account. Both account holders must be present when opening the account, and the account activity affects both of their credit scores. Pukas says joint cards are “a good way for couples to budget for household expenses and big life purchases as a team.”

How Will Student Loans Factor in?

According to Student Loan Hero, the average 2016 college graduate has $37,172 in student loan debt. But how should that affect your approach to splitting finances with your partner? Is it seen as a negative or, even worse, a deal breaker?

Knowing the other person’s student loan situation is important to a healthy financial relationship.

According to Megan Ford, president of the Financial Therapy Association and a licensed marriage and family therapist, says most couples consider bringing student loan debt into relationships to be pretty normal. However, she advises they get smart about how they manage it together.

“If both partners owe a substantial amount, they will likely have to navigate how to pay their loans, as well as meet their other financial goals,” Ford told The Penny Hoarder. “Consult help if you’re unsure what the best strategy is — a financial therapist or an accredited financial counselor would be a good place to start!”

How to Protect Yourself While Splitting Finances With Your Partner

Since millennials are open to sharing finances but are getting married later, they run a significant risk: There are fewer laws to protect unmarried individuals’ finances should the couple choose to split.

Sound scary? Definitely.

The good news is, there are a few ways to protect yourself without tying the knot.

1. Put Your Strategy in Writing

Putting things in writing is a proactive way to protect your and your partner’s finances before marriage. It also ensures you both have clear expectations of how much each should contribute and when — and by signing the contract, you both make it clear you agree to the terms.

There are plenty of DIY legal sites, such as RocketLawyer, to assist people with writing cohabitation agreements. Setting up such an agreement should be one of your first steps when you decide to share finances with your partner.

2. Sign a ‘No-Nup’

Ever heard of a “prenup”? A “no-nup” is similar in the sense that it outlines how partners will disburse shared finances and property should a couple split or someone dies.

According to Schmitz Law, no-nups address assets and liabilities, who pays the bills and who gets what.

3. Keep an “F-Off” Fund

This might seem harsh, but an “f-off” fund is something I wish I had a few months ago when my ex abruptly broke up with me. I think it’s worth including.

I learned about the “f-off” fund from this article on The Billfold by Paulette Perhach. Basically, an “f-off” fund is a personal emergency account that can protect you when things go awry — your relationship, your job, your living situation, etc.

If the name is too much for you, think of it like an emergency fund — or as Nicole Dieker describes it, an “in case something bad happens” fund.

Because trust me: Life is unpredictable. Things happen, including bad ones. And take it from me: You don’t want to feel trapped when they do.

Kelly Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.