Before you get married, you would have your own bank account for your own savings. Let's say your bank account is the circle A below.
Similarly, your wife or husband also has his or her own bank account. Let's put your spouse's bank account as the circle B below.
Each of you have your own money but its time to settle down and get married. Once you get married, there are household expenses which you need to plan for. Failure to plan may result in overspending and land you in financial problems. How do you prevent that?
Joining your bank accounts as a couple
I was attending a class on business statistics and the lecturer used an interesting real life example to illustrate the topic of probability. When circle A and B joins together, there is a small overlap in the middle. This is like a husband and wife getting married and start a new family. The overlap in the middle is called the joint account. Traditionally, many people in the past open a joint bank account when they are married. This joint account is used to pay for general household expenses such as utilities bills, housing loans, kids expenses. Both husband and wife contribute a certain amount into this account every month. The rest of their money is still in their own bank account for their own use.
With this joint account, the husband and wife can agree and budget their household expenses effectively and use this account to pay for the necessary expenses. They are able to control their household expenses better and eliminate the risk of overspending. They can still save and manage their own personal money separately. This is a simple way of managing finances as a couple. If both husband and wife want to go another step further to save for retirement together, they can open another separate joint account just for retirement savings.
Nevertheless, one may argue what happens if there are unforeseen cost such as your child falls sick and needs to go to the hospital? Of course these are necessary costs and you should have money set aside separately for these circumstances. Or if the cost is still manageable and payable from the household's joint account, the couple can spend lesser on other things just for that one month.
As the couple earns more, they can increase their household expenses but their retirement plan should not be affected. Living within your means may be the simplest but greatest wisdom there is on financial planning. If you want a better life, earn more money so you can spend more but still be in control. If you don't earn that much, then don't spend too much. That's as simple as it can get. Spending more on food, shopping and family life is good as long as you are in control. However, be careful of debt which can bring you from rich to poor in an instant.
I think this is a good way to be in control of your money together with your spouse. What do you think and how do you manage finances as a couple?
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1. How much money is needed to get married and start a family in Singapore?