A generation ago, couples merged their finances as soon as they merged households. Today, married people’s financial affairs aren’t so simple. A 2005 survey conducted by the Raddon Financial Group and reported in the Wall Street Journal found that 48 percent of married couples have two or more checking accounts between them, an 11 percent increase from just four years earlier.
As couples marry later in life and enter their union with more money, more assets, more liabilities, and more drama, they become increasingly unwilling to pool all their resources in joint savings and checking accounts. They look at separate accounts as a way to maintain their emotional and financial independence.
Many marriage counselors and financial planners view learning to navigate money together as a crucial step in becoming a functioning couple, so even couples that are adamant about controlling their own spending money can benefit from certain types of shared accounts. There are also some situations that do warrant keeping some money separate, and for folks in these special circumstances, individual accounts are a must.
Yours, Mine, and Ours
Most financial consultants advise that while it’s okay to use separate accounts for day-to-day spending, it’s highly beneficial to keep some resources pooled. “A joint account for clearly defined joint living expenses is useful and even advisable,” says Melinda Donovan, senior vice president and trust officer at Cambridge Trust Company in Cambridge, Massachusetts. She recommends that once the couple has tallied up the total amount of money required to run their household each month, each partner should contribute an equal percentage of his or her income to a joint account that’s used to pay mortgage and car payments, property taxes, utilities, groceries, and other shared expenses. Having these payments come from a single account makes it easier to track the expenses and also naturally encourages couples to have regular check-ins about their finances. If a couple is saving for a vacation, a new car, a home renovation, or another big project, keeping an additional joint account expressly for that purpose, with each partner contributing an equal percentage, is another good idea. “A joint account for saving for a mutual project or dream can be inspiring and build a sense of teamwork,” Donovan says.
Of course, joint accounts require that couples disclose their financial habits and follow spending guidelines, which some people find difficult. If one partner is relegated to being the “chief financial officer” of the relationship, it could cause strife if the other partner feels left out. It also diminishes privacy, which could cause irritation if one partner feels interrogated about every purchase he or she makes.
Yo’ Money, Yo’ Problems
“Separate finances and bank accounts give each a sense of independence and autonomy that can be very healthy,” says Donovan. “Bookkeeping and knowing what you have are easier when you are the only one pulling on the account.” If you balance your checkbook but your spouse doesn’t, you’re not subject to her laxity. If you’re a saver and he’s a spender, separate accounts mean that you don’t have to look over his shoulder and monitor the marital pool of money. But while separate accounts foster independence, they don’t encourage couples to actually work on or resolve their differences about handling money, and the hands-off approach can backfire if one partner is overspending or acting foolishly and the other has no way of knowing that.
If partners have serious disagreements about managing money and finances, that can indicate a deeper problem in the relationship. “In these cases, mediation may be necessary—either financial or psychological—because it can cause too much strain and end up breaking a relationship,” says Donovan. “Coming to a set of common guidelines that both agree by live by is essential.” Even couples with separate accounts must agree to follow similar spending and saving patterns, so that when unexpected expenses, like home repair or travel, arise, both parties can still contribute equally.
When to Keep ’Em Separated
Even if a couple is ready and willing to merge all their finances, there are some situations that call for keeping at least some funds separate.
- If one spouse is paying alimony or child support. “One partner supporting a former spouse or children should definitely maintain an account separate from the current partner and their shared life,” says Donovan. Although this doesn’t preclude sharing a checking account with the current spouse, the separate account makes it easier to track expenses and obligations for the former family.
- If one partner has poor credit or is paying down debt. Few people enter marriage without at least a little financial baggage, but if one partner has serious black marks on his record—bankruptcy, foreclosure, overdue student loans—it is wiser to make payments from a personal checking account.
- If one partner receives an inheritance. “No matter how much anyone loves their son- or daughter-in-law, they want Grandpa’s largesse to belong to Grandpa’s descendant,” says Donovan. That person can put the money toward joint interests, such as a home purchase or a child’s college fund, but it should be held and managed by the person who inherits it.
“Money has a big impact on relationships, regardless of the amount of it,” says Donovan. “Maturity, mutual understanding of finances, and similar backgrounds can help a lot in dealing with the vagaries of love and money.” The most common arrangement is to keep separate accounts for personal expenses, like shopping and lunches with friends, while maintaining joint savings and checking accounts for shared expenses. This method offers couples the privacy and autonomy of managing their own small purchases while still being accountable for accumulating wealth for the future. Having separate bank accounts doesn’t reflect a lack of commitment to the marriage; it reflects the reality that money is messy, and there’s no such thing as a one-size-fits-all approach to managing it.