How dual-income couples should invest their cash

She wants to take risks to build the family nest egg faster. He only wants to make very low-risk investments and keep the family’s money safe. Scenes like this happen all the time as couples with very different views on investing look at where to put their money.

Indeed, a survey earlier this year by AIA Singapore found that most married couples here don’t see eye-to-eye on how to manage their finances, with about 87 per cent of married individuals disagreeing with their spouse half or more of the time about how to manage their money.

A big part of the reason, AIA found, is that men are more inclined to invest while women prefer to save. Women currently allocate about 41 per cent of their financial portfolio to savings compared to 35 per cent for men, while men allocate 32 per cent of their portfolio to somewhat-risker equities compared to 25 per cent for women.

Those disagreements over investing can impact more than just the family finances, as different habits relating to investing can lead to conflicts in a relationship. While research here is scarce, Kansas State University Assistant Professor Sonya Britt found in a 2012 survey of more than 4,500 couples in the US that “arguments about money are by far the top predictor of divorce. It’s not children, sex, in-laws or anything else. It’s money - for both men and women.”

Relationship expert Lyn Fletcher, from Relationships Australia, similarly observed that many people find their discussions about money end in arguments. “It’s not just about money,” she said, “but also what money represents – our way of life, our expectations and our dreams. Talking about money often goes to the heart of what we want out of life and this can make us a feel a bit ‘touchy’ and vulnerable.”

The results of disagreements here are likely to be similar. So before money and investment tear the family apart, couples need to figure out the best ways to resolve differences and invest their funds to secure their future.

TALK ABOUT MONEY

The most important step is for couples to talk about money, difficult as that may be to do.

Financial advisory firm Betterment suggests that couples start by deciding how to pay their bills and save for future goals, such as a new home or retirement. They should also discuss the debts that each of them brings to the relationship, and what will happen financially in the event of the disability or death of the other.

A good way to begin, Ms. Fletcher suggested, is to make a date to talk about your finances in the same way as you would make a business appointment. “Find a place where you both feel comfortable, allow enough time to talk and listen, make room for differences and sort out together how you handle money.”

Sometimes those discussions can be more straightforward than couples may expect. David Bach, author of Smart Couples Finish Rich, wrote that learning to manage your money together does not have to be overwhelming. Couples can start by figuring out precisely what they’re after, Bach said, whether it’s a vacation home, more wealth, or being able to travel. Then, couples should spend less and save more, since “money is easy to waste.” Finally, “finishing rich requires a written financial plan to outline your budget and savings goals.”

Rather than just saying “we need to save,” for example, it’s better to set specific savings targets and discuss how they will affect everyday spending. Instead of the risk-averse partner telling the risk-taker never to touch their retirement savings, the couple can talk about investment goals and time frames, then take as much risk as their goals allow.

One tactic that Betterment suggests to preserve harmony is a “yours, mine, ours” approach. To preserve some financial autonomy, each spouse can maintain credit cards and checking accounts in their own name to cover personal expenses. However, the bulk of their monthly incomes would go into a joint account to cover their monthly bills and shared expenses. They can also open joint savings accounts for important long-term goals, with both spouses contributing proportionate shares of earnings to the accounts.

Another tactic is for couples to split the tasks related to money, with one partner handling day-to-day household spending and the other focusing on long-term savings and investing. To reduce conflicts over their roles, some couples trade the tasks back and forth. One month you would handle household spending while your partner focuses on savings and investment, for example, and you swap roles the next month. If discussions about your finances become tense, it’s better and come back to it later. Understanding the roles, taking time to figure out your partners’ values regarding investing and communicating openly can make it easier to work together to achieve goals that you jointly set for your investments.

While you and your spouse may continue to have different styles and objectives for investing, talking about finances and setting up a structure to resolve disagreements can help a couple to invest well and be comfortable with their investments.