Should Couples Have Separate or Joint Bank Accounts?

Do you have separate or joint bank accounts with your partner?

There are many often unspoken dimensions in a relationship that introduce complexity and contribute to money repeatedly being a top reason for divorces today.

Such dimensions include such things as the:

• Varying spending habits of couples,
• fact that one spouse will earn more than the other over time, which can lead to a power struggle and potentially strain a relationship
• differing financial goals of each person
• depth of personal debt held by each spouse pre and post a formal commitment.
• beliefs about money, good or bad, that each person has grown up with.

Money really touches all aspects of our lives and goes hand in hand with stress for many couples.

Whether you’re married or living together, the decision to create a joint account or not is a pretty major one.

As a married man, getting a joint account with Mary seemed like the obvious thing to do.

I assumed everyone did this too until I got chatting to some friends and realised that there are quite a number of approaches:

1. Share and manage everything in one pot as a couple
2. Keep separate accounts
3. The main earner pays their partner an ‘allowance’
4. Share some responsibilities but keep some things private

Different things work for different people, but there are certainly many pros and cons to each approach.

Growing up, my parents pretty much had their own bank accounts even when they got married.

They often moved around alot and ofcourse they didn’t have the online banking technology and easy access we have today.

Culturally, there was also a preference for couples to have their own hustles and make their own money.

There was a distinct focus on each person marking out their territory in terms of assets and pretty much living different financial lives yet still together in a relationship.

Although this still exists alot today, there has definitely been a cultural shift towards greater transparency between couples.

We’re certainly in the #1 camp above with the approach of looking at both of our incomes as a household income, and having it all go into one pot.

Doing this requires a certain level of understanding and communication between couples, with rules around how much one can spend without seeking permission.

Other considerations include how monies in the joint account should be distributed or spent, and how much each person should get as an allowance etc.

Having reflected on why it seemed so natural to us to create a joint account, we came up with a bunch of pros and cons:

Pros of a Joint Account

Trust and Transparency

You’d expect this to be a given in most relationships, but it certainly isn’t. Having a joint account gives full transparency and reinforces trust in a relationship.

I’d say though that we definitely would not have entered into a joint account had we not been married or fully committed to each other.

[yellowbar]Practically, having a joint account removes the need for us to refer to “your money” or “my money”.[/yellowbar]

This has been especially helpful in circumstances where I had been the main breadwinner whilst Mary took time out to have children etc with a temporary hit to her income.

Planning

Budgeting and planning your financial life is alot more seamless if both incomes are received into a joint account.

This also helps with long-term planning for goals such as financial independence, which requires a commitment to building wealth as a team and singing from the same hymn book in all respects.

Related: Plot Your Escape. Choose Financial Independence

You could argue that once financially independent, couples should definitely live the life of independence and this includes having their own bank accounts.

I’d absolutely agree that this should be the approach.

In fact, I think couples should actually own separate bank accounts in addition to a joint bank account, especially in the wealth accumulation phase of their lives.

Asset ownership

Having a joint account encourages the joint ownership of assets tied to a defined plan that a couple may have.

There may be reasons to own assets separately such as the need to optimise for tax. However, that in itself forms a part of working together as a team and towards a common goal.

Owning assets separately just for the sake of it can be destructive and introduces unnecessary competition between couples with one guaranteed eventual outcome.

Cons of a Joint Account

Joint liability

If you’re married to someone, then the chances are you’re pretty much jointly liable for most things.

However, this is enhanced through association if you have a joint bank account, especially if one person in the relationship has a high level of personal debt or has a poor credit history.

If this is something you’re considering doing, you should both spend some time being open and transparent about your financial circumstances.

Be sure to get your free Experian Credit Score.

Having someone else’s financial life tied to yours is a big deal that can’t easily be shaken off in a couple of weeks or even months.

No Surprises

Having a joint account pretty much means you’ll likely have fewer surprises between you and your partner.

For Mary’s 30th surprise party, I had to go to great lengths to keep it a surprise given I couldn’t spend without her finding out somehow.

Credit cards remain an option for such spend, however, I’d really only recommend this if it’s for a genuine surprise for your partner.

Any other secret spend ofcourse defeats the whole point of transparency through a joint account.

In conclusion, sharing an account is quite a big leap, so it’s probably worth starting off small and see how you get on with your partner on small financial matters before diving all in like I did.

Perhaps start by opening a joint account with no overdraft facility and both contribute a small amount each month. This helps to build responsibility and trust, which are key ingredients in all dealings related to money between couples.

My experience of having both a joint account as well as personal one in our marriage has been absolutely optimal for both of us because it encourages a level of healthy independence in a relationship we see as a fully joint affair.

 

What is your experience of joint or separate bank accounts with your partner? What works for you and why?

Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.