Money and love make complicated bedfellows. Cohabiting couples represent the fastest growing family household type in the UK. There are 3.3 million couples living together unmarried, a number that has more than doubled since 1996, according to the latest official figures. Yet many couples dive headlong into cohabitation without understanding the full financial implications and without taking the time to discover if their attitudes towards money are compatible.
Talking about money with your partner
We Brits are loath to talk about money, even with our nearest and dearest, but failing to talk to your partner about your financial priorities can lead to big resentments further down the line.
The biggest source of tension between couples that end up at a relationship counselling service is money, according to Relate, the relationship support charity. Its counsellors warn that generally, couples don’t plan nearly enough around their finances before they move in together or get married. Money represents power and the dynamic can become difficult if one partner has much more or much less than the other.
So, as awkward and uncomfortable as it may feel, address the topic as early on as possible to avoid petty resentments building into more destructive arguments. Get your head around your subconscious attitudes and expectations around money, your values and what influences you, some of which may have been instilled as a child, and abandon your assumptions about how other people “ought” to spend and save.
If you’re nervous about talking to your partner about money, plan ahead to take the heat out of the situation - discuss the money conversation you want to have and set a time and date for it. In counselling, ‘contracting’ is often used to take the pressure out of a money discussion. Writing down and talking about what you want to go in the contract before any agreement is made can be useful. You might agree that you each have a pot of money that you can say is “yours” not “ours”, and you can choose to spend it as you wish. Or you might have a pot for joint savings, and put in place spending limits where anything above that sum requires a joint decision before you buy.
Try to make sure you are both fully understanding of finances, how much each other earns and what bills you have to pay.
There is a useful living together agreement template that you can download at advicenow.org.uk. It will help you put together an informal written promise about what you both own and how you want to share it including your house as well as possessions, savings or debts.
Renting or buying together
If you’re renting with a partner but are not married you’re probably both on the tenancy agreement in which case you are “jointly and severally liable” for the rent and any damage to your property. But, if you move in with a partner and just pay them rent, you have no rights over where you live and could be asked to leave by the landlord.
Things are more complicated if you are buying together unmarried. If one of you owns a property with a mortgage and the other is not named on the deeds, then the non-owner has no rights over the home, even if they have been informally paying money towards the mortgage or put a sum of cash towards the deposit.
If you’re buying together with equal sums or you decide you want to split the home 50:50, you can both go on the deeds as legal owners or “joint tenants”. That means you both own your home equally, and are both independently liable for mortgage payments. If one of you stops paying, the bank can chase the other for the full debt. If you split up and sell, you are both entitled to half the proceeds of the sale.
The other option, if one partner has much more money than the other, is to own as “tenants in common”. For example one person may own 60% of the property, the other 40%, and the house will be divided accordingly should you sell.
The problem with this is if one of you dies you are not entitled to inherit the full rest of the property, only the proportion that you legally own. If, on the other hand, you are joint tenants you will inherit the whole home even though you only technically own 50%. It is a good idea therefore to draw up a will if you are tenants in common but would want your partner to own the full property in the event of your death.
Many couples do not realise that in England and Wales they have no legal protection if they move in together unmarried and subsequently split up.
“Common law marriage” is a myth. Unless you are legally married there is no obligation for your ex partner to provide for you if your relationship comes to an end. This can catch some couples out when one half of a partnership owns a home or is bringing more money into a relationship.