Separate or Shared Bank Accounts: What’s Better?

in Financial Planning by

I remember returning home after my honeymoon totally relaxed and happy. It was an exciting point in our lives, full of possibility and with lots of new decisions to make as a young married couple. I changed my name, we got a new apartment, and also we took a little drive and went to the bank that we both used and joined our accounts.

I don’t remember having a detailed discussion about it. I don’t remember agonizing over the decision. It was just something we decided to do, likely because we both watched our parents have joint accounts and so it seemed like a natural next step.

We were also quite young on that day at 22 and 25 and so we hardly had any money to join. Maybe that’s what made it all so easy. What’s the big deal about a joint account, when it only has $300 in it, right? I can say, though, that over the years we’ve never had a bad argument about money. (We like to argue about who does which chores instead. Somehow that inspires much more passion and anger than paying our bills!)

I attribute our relatively harmonious attitude about money in our house to joining our accounts in those early days. We’ve been forced to work together to maintain our accounts, pay off debt, and of course make plenty of mistakes along the way. We’ve gone through periods where I was a bit more controlling about spending, asking my husband about various charges in accusatory tones. However, for the last few years of our 5 year marriage, we’ve adopted a rule where each of us has spending money each month that we can use on whatever we want, so that eliminated that money tension altogether.

I say this as a disclaimer because I’m obviously happy having joint accounts, but that doesn’t mean I don’t see the benefits of keeping finances separate. There are so many articles out there that say managing your money one way is better than the other, so I wanted to delve into the issue a bit deeper. The truth is, there is no blanket right way that will work for everyone since each couple will have completely different situations and circumstances.

Many Couples Choose a Combination

Our 100% joined accounts are actually not as common as I thought. In fact, according to a calculator on Slate where I entered in our stats including income range, age, and education level (seen below), only 26% of couples like us have joint accounts. Far more have a combination where they each have their own individual accounts but use a shared account to pay for joint expenses.

slate

Couples who use a combination of joint and separate accounts have to ask some important questions though. For example, does each person put in an equitable amount of money? Or, does each person put in an equitable percentage of his or her income? What happens if one person is a stay at home parent? How do you allocate unexpected bonuses? Who will be in charge of tracking spending and how will you measure net worth? Will you still sit down together and discuss your finances and keep track of all your accounts or is each person individually responsible for their financial fate?

Because of these questions and the complicated nature in which the answers might affect the relationship, it might take longer to work out some of the fine-tuning of having both individual and joint accounts. However, many couples report feeling both autonomous and like a team when using this method.

The Benefits of Separate Accounts

Similarly, many couples enjoy having completely separate accounts. The results of a survey that TD Bank conducted last year showed that “thirty-eight percent of individuals in relationships who maintain separate accounts said they do so for independence.” This was the most common reason for maintaining separate accounts, which shows that many people just like having control over their own spending habits without someone else looking over their shoulder.

The Wall Street Journal interviewed Kelly Long, a CPA and financial planner who says, “Many couples need to have separate accounts to maintain financial and emotional harmony in their relationships.” She argued that many people now get married in their late 20’s which means that many of their financial habits and accounts have already been established. Perhaps this is why joining accounts with my husband when we were 22 and 25 wasn’t that big of a deal. As recent college graduates, we definitely didn’t have any long-held beliefs about money or how it should be spent. I’d like to think that we’d still be willing to make some compromises on our money habits even if we’d gotten married later though.

Kelly Long also brought up another interesting point. She said that having separate accounts forces each person to “remain financially literate and able to manage money on their own” in the event of a divorce or death, but one could just as easily argue that if couples sit down together to look over their joint accounts, they can also remain financially sharp.

It Comes Down to Communication

Ultimately, it all comes down to communication and awareness. I don’t think that any one person in a relationship should have total control over paying all the bills and managing all the accounts. It’s the responsibility of each person to be aware of their finances, know bank passwords, and know when things are due, just as both people should take part in household chores or raising kids. Sure there will be times when one person has to do the brunt of the work in all those categories but at least trying to be a team throughout all of life’s responsibilities will enrich and strengthen a partnership.

Whether or not a joint account is right for you and your partner is a totally personal decision that will be unique to each couple. This decision should be based on what is best for your family as a whole. If one partner spends too much then perhaps it’s best to keep money separate or have them agree to weekly check-ins. If one partner makes a significant amount more than the other, then perhaps it’s more equitable to share. Really, each couple is completely different and whether or not they have children will also impact just how much they need to share in terms of financial responsibilities.

USA today recently featured a graphic (seen below) that American Express produced that shows when couples began discussing financial issues. Interestingly enough, most couples start talking about money when they are dating, and perhaps that’s the best time to decide how you will handle your future accounts as well.

usa_marriage

Really, as long as you’re a couple who actively discusses money, does not keep financial secrets, and is open to growing your net worth right along with your partner, it doesn’t matter exactly where your money is located.

The problems come when one partner hides spending, has uncontrollable credit card debt, or is in some way living a financial life that is harmful to the family. If you can avoid that by being open, generous, and respectful of your partner’s wishes then you’re likely to have a long, successful relationship that’s built on trust and common goals, regardless of whether your money is separate or not.

The following two tabs change content below.

Catherine Alford

Catherine Alford is an award winning personal finance writer who contributes to several online publications including The Huffington Post, top personal finance blogs, and her own site, BudgetBlonde.com. She received a B.A. from The College of William and Mary and an M.A. from Virginia Tech. When she is not reading and writing, she is taking care of her young twins. Follow her on twitter @BudgetBlonde.

19 comments

  1. Sue Cook

    Personal opinion joint account is the best to solve your money arguments. We have joint checking and savings accounts and have never had an issue about money. Each month one of us pays the bills; we set up our accounts so we know if any big purchases have gone through the account and we have an agreement that neither one of us will spend more than $200.00 without consulting the other one. Also the only credit cards we carry are Chevron and American Express (pay it off every month) Of course this is our second marriage so some things have been learned by experience. We must be doing something right because our credit scores are over 800 and we are in our 60’s.

    Reply
    • Cat Alford

      Sounds like you two have things under control!

      Reply
  2. Rich

    Interesting article, Catherine.

    Our situation is perhaps a hybrid of the hybrid you mentioned.

    I happen to make a lot more money than my partner but we view ourselves as a couple with shared goals. The disparity in our incomes does not come up.

    What we have a shared main account where all our income goes. This is used to pay bills, make investments etc. Then we each have our own separate accounts linked to this account where the same amount is automatically deposited every month. We can each do whatever we want with that money. It especially comes in handy during birthdays and Christmas so she or I don’t accidentally see what the other is buying for them! 🙂

    I should also add that we trust each other and do not have secrets.

    All the best,

    – Rich

    Reply
    • Jake

      I’m with you Rich. My wife and I have the same setup. A set of joint accounts that our paychecks, bonuses, and any “found” money goes into, then we both have separate personal accounts that a set amount goes into each payday. We too didn’t want to know how much and what items each other was buying for the other for holidays, birthdays, “just because”. Over our marriage my wife and I have leap frogged each other in income but our goals are shared and we too trust each other.

      Reply
      • Cat Alford

        Sounds like you guys have a great relationship!

        Reply
    • Anonymous

      Awesome idea thanks!!

      Reply
      • Cat Alford

        You’re welcome!

        Reply
    • Cat Alford

      I love that and heard it works for a lot of people!

      Reply
  3. Joel

    It is worth noting that the joint account rate jumps to 39% for a couple with college degrees rather than graduate degrees. It could be that a couple with graduate degrees often marries later, and assets/liabilities have a greater chance of being disparate.

    I think it is also important to see which accounting method has the best financial results (i.e., which group has a greater average net worth.) This I think is more important than the question: do other couples combine accounts or not?

    Reply
    • Cat Alford

      Now that would be an awesome study that I’d love to read!

      Reply
  4. Charles Harder

    Great article! So glad to hear young (er) people still have a joint account. We have been married 43 years now, have never had two accounts – it has worked just fine. Quicken allows us to track money my wife receives for quilts or when she worked part-time after the kids were gone. She spends it any way she wants but mostly for charitable, quilt projects like an orphanage or VA hospital etc. I get to spend the “kick back” we get from our Capital One credit card – only one we have and have always paid if off every month.

    Reply
    • Cat Alford

      I love that she has her own projects and work and can spend the money how she pleases – that’s great!

      Reply
  5. Thomas

    I think it depends very much on your sense of what a good relationship is. Being a couple inherently creates a tension between personal autonomy, on the one hand, and being a unified team, on the other. Either one can have a dark side – personal autonomy can mean the couple simply drifts apart, while excessive unity easily turns into grimly unhappy codependence.

    A couple can be stable and happy anywhere on this axis, but will be more so if it shares a common view of where to be . Merging all the accounts is on the “unified team/codependent” end, while keeping everything separate is on the “autonomy/drift apart” end.

    Unfortunately, all too often couples are composed of an “avoidant” and an “anxious” partner: the avoidant one prefers the autonomous end of the axis (in most matters), while the anxious one prefers the unified end (also in most matters).

    Interestingly, in this case it is almost always the anxious partner whose view “wins”, because avoidants are typically conflict averse and will either break up or give in – and the lower-conflict option is usually to give in. Indeed, since marriage itself, from a legal point of view, is very much on the unified team/codependent end of the axis, when an avoidance/anxious couple gets married it is the anxious partner who is happy about it, and the avoidant one who is giving in.

    One consequence of this is that, if you have unified accounts, you should not assume a) that your partner prefers it that way or b) that your partner will tell you the truth about it, if challenged. There’s not a lot you can do about that, other than to be aware of it.

    Reply
    • Cat Alford

      All excellent points that you bring up. I think would be a solution is a hybrid like what many people have said over here.

      Reply
  6. Thomas

    My comment got moderated out? Why?

    Reply
    • Jacqueline Quasney

      Jacqueline Quasney

      Thomas, Not sure why your comment was removed. Please feel free to post again. Thanks!

      Reply
  7. Fred

    A very interesting, and very serious, subject. There is one over-riding principle that must be understood regarding your marriage, and that is, you are committed to each other for LIFE. My wife and I have had joint accounts since the day we were married. Granted, we didn’t have much money either but it seemed the natural thing to do. We have never had money issues, or debt problems. Another key is the trust factor. The word almost seems inadequate to describe the relationship between husband and wife, but nevertheless, it is of paramount importance. It is the foundation on which your marriage rests. We have never questioned the others spending habits and have always had our finances under control. We both have access to our finances at any time and for anything we choose to spend it on. But, every significant purchase is completely discussed and decided on together. I think our cultural decline in regards to the sanctity of marriage leads to some of the difficulties young marriages are influenced by today. Divorce rates are at an all-time high. Sorry for the preaching, but I think this decline is a factor in many approaches to marriage. Another key word is communication. Couples must be completely open and transparent with other. Nothing, and I mean nothing, should be kept from the other. As you said, everybody’s situation is different. But, instead of just looking at the mechanics of how you will proceed, remember the principles of trust and commitment. Let that be your foundation. By the way, both our credit scores are in the high 800’s and we have NEVER been late with a bill payment. And, we have been married 50 years last April.

    Reply
    • Cat Alford

      Wow congratulations on 50 years! That is wonderful. You are a role model!

      Reply
  8. Lillian Schaeffer

    Thanks for sharing your experience with joining your bank accounts after you got married! I just got married a couple months ago, and this is something my husband and I have been deliberating about. I’ll definitely mention that joining our accounts early might make it easier to adjust to the change.

    Reply

Leave a Reply

Your email address will not be published.

Disclaimer. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.