His money, her money, our money

Prior to marriage, individuals have complete control, access to and allocation of their income. Once a family nucleus is formed, different ways emerged whereby money is managed in the household. Some families maintained separate control, taking turns to foot common bills; some have minimally a joint-expenses account, whereby both spouses contribute equally. In some countries such as Japan and even China, wives hold the purse strings traditionally, on the other extreme.

I don’t deny that financial independence, as a person and individual, remains very important. By financial independence here, I mean the freedom to spend your income, to a certain degree. My spouse and I have our own salary crediting account and savings account. From a family nucleus perspective, I am of the view that family with common financial goals should tackle them together. Whether it is for kids’ education, buying your first or second properties, even for retirement… Would one party be able to commit to any of the goals above alone?

Of course, this is not a call for couples to definitely have joint accounts. I am keen to share from experience however, how does joint accounts help us tackle financial burdens and also reach financial goals faster as a team. We still manage our own monies individually. However, we also have 3 primary joint accounts:

• Joint-kids investment account
• Joint-savings/expenditure account
• Joint-investment account
  

Joint-kids investment account

As parents, we all know how expensive it is to raise children. We also know the time-value of money by the time our children reach their adulthood 20 to 30 years from now. It isn’t enough to just save or put aside some money in an almost zero interest-bearing account. You need to find ways to grow their money. My spouse has her own ways of saving up for our child, via endowment plans. I contribute to my child’s CPF account and make ad-hoc investments with funds from her savings account.

Together as a team, we also set aside $1,000 monthly ($500 each monthly) for my child’s regular savings plan. It started out as an individual $500 monthly contribution from my end, but I managed to convince my spouse that an equal $500 injection from her end is better off earning peanuts in a plain savings account.

While the numbers are nothing impressive right now, we are gradually building up her portfolio over the long term. With the equity market currently on a downtrend, and applying Dollar Cost Averaging (DCA), she is in fact getting more unit shares per each $1,000 investment injection.

Joint-savings/expenditure account

Electricity and water bills, property taxes, vehicle road taxes, petrol consumption, child’s preschool education are some of the common expenses that we have. We take it as an equal share between us and contribute $1,000 monthly ($500 each monthly).

Individual expenses are still footed by each of us separately e.g. dinner with friends, credit card spends, parents allowances. But by having a joint-expenditure account, it gives a sense of common ownership and lowers the frequency of disagreement of who pays for what.

Essentially, we do not spend the full amount (aka $1,000) each month. What remains is saved, and accumulated as a savings account over time. Any amount beyond the first $2,000 overflows into the joint-investment account.

Joint-investment account

The joint-investment account serves as the source of funding towards our trading account and is our largest commitment thus far. Initial contributions started off $3,000 monthly ($1,500 each monthly). From February 2020, we decided to up the game to $4,000 monthly ($2,000 each monthly).

For us both, this serves as the foundation towards building our common retirement funds. In comparison, my spouse is less investment savvy. Her form of savings and investment are via savings accounts, fixed deposits and endowment plans. There is nothing wrong with the above instruments discussed. They are however not very attractive in terms of the yield over the long term.

I am however the person who is in comparison more investment savvy and greater interest in growing our wealth. She recognised this, and I have full control over the way this account is managed. Some advantages of a joint-investment account are as experienced:

Greater combined firepower.

I combined the effort based on individual effort and combined effort over periods of time. It is not hard to see that with greater combined effort comes greater financial firepower.

	Solo effort (past)	Solo effort (present)	Combined (past)	Combined (present)
Monthly	$1,500	$2,000	$3,000	$4,000
Annual	$18,000	$24,000	$36,000	$48,000
30 years	$0.54 M	$0.72 M	$1.08 M	$1.44 M

Essentially, my belief is that a family nucleus should work as a team. An individual can definitely save and scrimp and invest as much as he wants, but every effort is subject to a cap or limit. The table above only shows the investment capital put in up to a 30-year period, which reflects the amount of time we have before reaching the statutory retirement age.

If we were to look at it on a modest 8% per annum compounded returns, it could potentially form a very good retirement nest of $5.7 M at age 65 for both of us for a $1.44 M investment capital.

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Economies of scale.

With combined firepower, it becomes more cost-efficient and time-effective than ever before in investing. For example, I am using Standard Chartered trading platform, which charges 0.20% brokerage for SGX market, with minimum brokerage fees of $10. What this means is that the optimum contract value for a trade is $5,000. Making a $4,000 trade would mean that the brokerage fees now form 0.25%; for $2,000 it means 0.50%. Combining firepower in a way, would allow us to bring down our brokerage fees should there be market opportunities.

On average, this means that I try to enter the market every 3-4 months based on my solo efforts to make the fees worthwhile. With combined efforts, this increases the frequency of staying vested to every 1-2 months.

Greater control over investment journey.

How many of us here face the issue over loose money control, not knowing where money is flowing or even knowing how much you may potentially have over a period of years?

By committing a ‘large sum’ monthly (which is a huge proportion of our monthly income) towards a common goal — which is to grow our wealth, we realised now how much greater control we have over charting our investment today as compared to the past. I know the potential upside and downside of my investment as an individual investor. My spouse however, would either be leaving the upside (unknown) into the hands of a third-party e.g. endowment plans or limiting the potential gains in stable and relatively risk-free but low interest-bearing instruments e.g. savings account and fixed deposits.

With joint accounts, we take greater interest as a family in financial matters. With such a high proportion of income allocated as a joint, it is no longer a matter of his money, her money BUT our money.

Money can be managed very differently from family to family depending on how money is viewed as an asset. Money for us is just a means to an end. We look forward to days by the beach, travelling around the world for experience and immersing ourselves in different cultures. We can choose to YOLO now or plan to enjoy a whole lot more later. Understanding delayed gratification is tough, but not something so tough that we can’t take it on.

Do couples like yourselves have joint-accounts too?