Five steps to being investment-savvy newlyweds

17 May 2018
With the royal wedding just days away, one would hope that all regal attendees have everything they need in order – from their designer outfits and flamboyant hats, to the all-important wedding gifts. But what do you get for a couple that seemingly has everything?

For what it’s worth, though Prince Harry and Meghan Markle are by no means a typical millennial couple, they do fall into a generation that is said to prefer cash as a wedding offering over tangible gifts. The royal couple however, have reportedly asked guests for charitable donations in lieu of wedding gifts.

While agreeing that this generational shift away from registering for traditional gifts makes sense, Lisa Airey, Strategy Analyst at Old Mutual Unit Trusts, urges millennial newlyweds to consider investing their monetary contributions into building a financially secure future together.

“Opting for cash over gifts is a sensible decision when considering that many young couples live together before getting married nowadays and have, as such, already acquired a large majority of the household items that are traditionally given as wedding gifts. It is important, however, that these soon-to-be married millennials see the lump sum of cash that they are likely to receive as an opportunity to jumpstart reaching their combined dreams and aspirations. Saving towards a deposit on your first home or birth of a baby is so much more rewarding than receiving a second dinner service set.”

To help young newlyweds in making the right decisions with regards to their money, Airey lists five steps to investing effectively as a couple.

1. Develop a strategy together

It is essential that the couple comes up with a long-term strategy for saving and investing that they both agree is in line with their combined aspirations, explains Airey. “Every couple will understandably have different goals, so it is important that you talk this through in great detail before getting married, to ensure that you are on the same page when it comes to making any big financial decisions.”

2. Establish a system for resolving disputes

Airey warns couples that, while they may be in a blissful honeymoon bubble right now, they’re bound to clash at times and should prepare for when those times come. “Have a system and resources in place to help you through the difficult disagreements,” she explains. “And seeing that money problems are the most common reason for divorce, a financial planner can prove very handy in helping a couple to manage their finances effectively when they may not see eye to eye,” she adds.

3. Commit to working together

Even though it is common for one spouse to take the lead when it comes to financial decisions, Airey says it is important that both partners be involved when it comes to their long-term financial plan. “The fact of the matter is that doing things as a team will result in a better outcome and allow for a better partnership over the long-run.”

4. Understand each other’s goals and fears

In order to build a successful and mutually beneficial relationship, Airey says that it is essential for both parties to be completely honest about not only their financial position going into the marriage, but also their financial goals and fears for the future. “It is common for two partners to have different levels of aversion to risk, or different spending habits, and that’s okay, as long as they are transparent with each other about these from the start.”

5. Stay focused on goals

The last tip that Airey offers to newlyweds is to be realistic about the time horizon for reaching their goals. “Couples need to keep in mind that building wealth is a marathon, rather than a sprint. Developing a well-thought-out financial plan and strategy is very important.”

On the topic of investment vehicles, however, Airey does state that unit trusts can prove extremely helpful in reaching goals and aspirations sooner than expected. “Unit trusts are designed and managed to grow your wealth and help you achieve your goals and dreams, by offering an easy, convenient and affordable way to invest in stock markets and asset classes such as equities, property, bonds and money markets. Unit trusts are also liquid, so you have access to the funds when you need it, but your initial capital grows unlike in a regular savings account.”

Airey suggests selecting a unit trust fund that is best suited for your time horizon. “After setting your goal date, select the right unit trust investment appropriate for your risk profile and asset allocation”. She adds that couples should consider a tax free unit trust. “No tax is charged on interest, dividends or capital gains as long as you stay within the R33 000 annual and R500 000 lifetime limits. This means that tax free unit trusts can prove extremely helpful in reaching goals and aspirations sooner than expected.”

Some of the most common goals that couples could consider investing towards include:

  • Saving for a deposit on a property;
  • Investing for an unforgettable holiday;
  • Saving and investing for a sabbatical;
  • Funding children’s education;
  • An emergency fund for unexpected future costs.

“Once you’ve merged your life with someone else’s, you’re working towards building the life you want to live together,” says Airey. “Being on the same page about your goals for the future is a cornerstone in a solid marriage.”