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My (romantic) partner received a scholarship of roughly $12,000. We live somewhere (in Europe) where this is just about enough to cover a year of living expenses for one person. They will receive the money in one payment at the beginning of the year.

Of course if we had no savings together, I would ensure they put the money in a regular no risk savings account.

I also have savings of around $40,000 mostly invested in a low-tax savings account which is relatively high risk/high return since I am saving for long term (10+ years). And another $10,000 or so in a low risk account.

I think it would be worth getting my parner to put the money in an equivalent (or a joint) savings account with high risk/high return, then each month they can withdraw $1200. Then, since I have (relatively) a lot of savings, I could sign something to guarantee that if their investment value goes down, I will pay them the difference (which would only happen in the unlikely event we broke up before the end of the year, otherwise we would just share our income).

Is my intuition right? Or is it best they just keep the money in a regular no-risk savings account?

(Clarification: The question is whether we should make the financial decision of how to keep the money based on our total savings or keep that money separate from the rest of our savings. I also previously forgot to say that I have just under 1 yr of savings in a low risk account too.)

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    The money has a definite use in the short term. Why add risk into the equation?
    – Jon Custer
    Commented Mar 28 at 12:37
  • @JonCuster because even if we lose that money we would still have other funds to use. The question is whether we should make the financial decision of how to keep the money based on our total savings or keep that money separate from the rest of our savings. I also previously forgot to say that I have just under 1 yr of savings in a low risk account too.
    – user115815
    Commented Mar 28 at 15:38

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My 5 cent: I would advice not to entangle financially until a point in your relationship where you are fully committed and ready to entangle legally as well (marriage, kids, shared house ownership etc). It's just a lot easier this way and both of you having their own money reduces friction points that you really don't need to have at this point.

Given that it's just 12k that' supposed to be spent over a year anyway, the potential investment gains are too small to bother with the extra complication and risk.

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Given that you can break up, I highly recommend not combining accounts. There's really no advantage to doing so. They can set up their own if they want to.

BUT: Money that you are going to spend soon does not belong in a high risk account. When you are young you can afford that tradeoff in your retirement savings; you have decades to recover if something goes wrong. Not so for the scholarship funds.

Also: You should generally keep some savings in a low-risk account (typically no more risky than CDs or money market) that you can live on if the market goes into a downswing, so you aren't immediately forced to sell investments at a loss before the market can recover. Usual recommendation is to keep the equivalent of a year's spending in that safe account; I would say at least six months. I would say that tuition is one of the necessary expenses that should be guarded this way.

If you friend has other money which exceeds that short-term buffer amount, then sure, they may want to invest it. But he careful about trying to advise them. Remember that if you push them into something they aren't comfortable with and your advice doesn't work out, that can destroy a friendship. Make suggestions, then back off and let them look at advice from others as well and do what makes sense to them.

Even if you were getting married, there's a lot to be said for maintaining three pools of money, one for each of you and one for shared expenses. That avoids a lot of potential arguments.

There are fun ways to have your hands in each other's pockets. There are also dangerous ways. Some may be both, but financially tends toward the latter.

(Re the clarification of the original question: I still think this is short-term money, and belongs in a relatively safe account in addition to your buffer funds -- and part of that $10k you mention sounds like working capital than like buffer funds. I also still say keep this account separate; the additional hassle is VERY minor. Cue Billie Holiday: "Mama may have, and Papa may have, but God bless the child who's got her own.")

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