Personal finances trump love in Canadian relationships

How I love thee, let me count the ways. Literally. It's been said love knows no bounds but ask a Canadian and you may discover money matters trump all.

A whopping 77 per cent of Canadians say they would not marry someone who was bad at managing their personal finances or if they held excessive debt, according to a recent TD Canada Trust Valentine's Day poll.

The poll, which surveyed Canadian adults currently or recently in a committed relationship, found:

• 29 per cent say they would date but never marry someone who couldn't manage their money well.

• 37 per cent say they wouldn't even date someone who didn't have their finances under control.

• 11 per cent of those surveyed say they have been in a relationship with someone less financially savvy and they would never do it again.

"Clearly, Canadians feel that financial literacy and knowing how to manage money is an important life skill and it's something that they look for in a partner," says Andrea Phillips, vice-president, Retail Savings and Investing, TD Canada Trust in Toronto.

"It's very important to talk openly and honestly about your finances in any relationship. Whether you keep your finances separate or together, it's important to find an arrangement that really works for you and your partner, and continuing to talk to your partner about finances as you progress."

Interestingly, the survey also shows that when it comes to joint personal finances, Canadians are more likely to take the plunge and buy a home together (72 per cent) than they are to open a joint bank account (68 per cent), set a joint financial plan (64 per cent) have a joint credit card (52 per cent), or contribute to each other's RRSPs (43 per cent). By contrast, one-third say they keep their finances completely separate from their partner's.

Communication is key in setting goals

"What pleasantly surprised me was the number of Canadians that are comfortable talking about their finances. That's a great first start. It's the foundation to understanding your regular expenses and then determining your financial goals and how to get there," says Phillips.

But, one of the major mistakes couples continue to make is failing to discuss and then carve out mutual financial goals.

"They take one day at a time and hope that it all works out. In any kind of relationship you need to have common goals," says Fred Ketchen, director of equity trading at ScotiaMcLeod in Toronto.

"Keep in mind there are risks and rewards and you need to understand the risks and manage the rewards. That brings budgeting into focus and ensuring the money you have coming in is enough to satisfy what you're obligated for on the out-going side," he says.

A separate ING DIRECT commissioned survey reveals similar results: 89 per cent of Canadians say it's important for them to know about their partner's finances, including income, debt, assets and investments.

Despite this, the same survey finds only 50 per cent of Canadians claim to know everything about their partner's finances, while 28 per cent indicate they know a lot about their partner's financial matters. One in five Canadians (19 per cent) say they know only a little, or nothing, about their partner's money matters.

"For goodness sake, make some time to talk to each other. It can solve a whole lot of problems and you can come to a greater understanding of goals when you spend time on a regular basis talking about life with each other," Ketchen says.

Get schooled on your finances

Another key component for any successful union is financial literacy.

"I would suggest people who are approaching a point in life where they need to plan their financial future that it's certainly in their interest to take something like the Canadian Securities Course (offered by the Canadian Securities Institute)," Ketchen says.

"The other aspect is if you have a financial advisor, they are educated and willing to share their knowledge."

Same-sex couple considerations

For same-sex couples, the same tax and savings benefits apply.

"My understanding is that they do, that is a part of the law. Whether a couple be gay or not, if that's the legal arrangement, it will be treated as a marriage," Ketchen adds.

Phillips says there can be a number of benefits to pooling assets with your partner, including lowering a household's overall tax burden.

"People need to be comfortable pooling their assets so it's about having that conversation and deciding how you're going to manage your finances be it together or separately," she continues. "If you are married or in a common law relationship, you could consider a strategy where the higher income earner contributes to their partner's RRSP. The higher income earner can then claim a deduction on their own taxable income, and when the lower income earner withdraws the money in retirement it may be taxed at a lower marginal rate than their partner's, resulting in tax savings."