Recently love birds Mary and William sought my advice on keeping joint or separate bank accounts. Their union was less than a year old with both earning reasonably well. However in terms of spending habits Mary tended to like to go overboard and have a “good time”. On the other hand William had imbibed the culture of saving at a young age. He preferred to save and invest his money.
Inevitably money fights began to rear it’s ugly head in their marital home. After one of such days when Mary returned from a shopping binge they argued about her spending habits. While in bed later that evening William suggested that Mary pool her funds together with his in a joint account. A noncommittal Mary promised to consider it after speaking with me.
Now it is quite commendable for this young couple to seek financial advice. Handling money is probably one of the biggest challenges couples face. In fact disagreements on money is one of the most common reasons why marriages crumble and lead to divorce.
There are indeed many advantages in keeping money in a joint account:
Better decision making when it comes to money
Marriage is about sharing, working together with your spouse towards a common purpose. Money is definitely required to achieve that purpose. Pooling resources together in a joint account will make you work as a team. Two heads are indeed better than one when it comes to making decisions on money. Both parties are fully involved.
Stronger bond in the relationship
The act of working and doing things together helps to cement your union which is great for marriage. Keeping money in a joint account does wonders for strengthening marriage and building a healthy relationship.
Funds are easier to track and manage
It’s much easier to come to terms regarding where your monies are going in a joint account. It is impossible to be able to build wealth without an understanding of where your money goes.
Alignment of your money goals
Husbands and wives usually have different money goals in my experience. These goals could be varied both in the short and long term. Keeping money in a joint account forces both parties to meet, discuss and reaffirm on their goals before spending. This is probably one of the best ways to always keep your money goals in front of you.
Lower bank charges
Managing a joint account instead of separate accounts will lead to paying bank charges on one account instead of several. This could save the couple a tidy sum.
Keeping money in separate accounts definitely also has it’s advantages:
Financial incompatibility won’t pose too much of a challenge
A substantial number of couples are financially incompatible. This was not considered before the union was consummated. So if there are no major areas of alignment when it comes to money goals keep things separate. An example of financial incompatibility that is quite common is when a cautious spender marries a spendthrift.
Financial autonomy preferred
“I work hard for my money and I should be the only one to say how it should be spent”. Many people prefer to be free to take decisions about how their money is being spent all by themselves. They obviously see keeping money in a joint account as a lack of freedom.
Both parties have to earn
Keeping money in separate accounts is most definitely proof of the earning capability of both spouses in a marriage. The likelihood of keeping money this way is much less if one of the parties does not earn a significant income.
Easier to handle family responsibilities without disturbing your spouse
Imagine a scenario where Mary is also the breadwinner of her family, taking care of her parents and siblings. Williams might begin to see Mary spending so much on her family as excessive. In such situations Mary might prefer to have control over her own money. Williams could also be spending on his family members as well.
My verdict – Joint account or separate accounts?
My advise to Williams and Mary is to actually have both. It would be better to keep some money in a joint account for emergencies, house rent, holidays. A joint account makes sense when there are goals both parties agree on achieving.
While there are areas of agreement in terms of spending there could be many other areas of non-agreement. This is why each person should take a portion out of his or her income, from the seperate account into the joint account.
News.com.au published in the New York Post an article titled, “The key to a happy marriage…is a shared bank account.” The author shares a guide on how to manage joint accounts right. This advises partners to:
Set Up Accounts
Set up three accounts in advance … one for each individual and a joint account. Wages and salaries should be deposited into individual accounts. Look at what both make and agree to put a certain percentage of each wage into the joint account each month … then set it up to be automatically transferred.
Work Out Monthly Bills
Calculate how much you need in your joint account each month to stay afloat by adding up your monthly expenses. Once you have a figure see how much from each pay will need to be deposited. If your incomes differ drastically, put in the same percentage of earnings rather than the same amount. If only one partner works, deposit the wage into the joint account first, then transfer money into individual accounts.
Forget About Saving?
Automatically contribute a set amount from your accounts each month to build up your savings or to pay for big-ticket items such as holidays.
According to Jeremy Vohwinkle it’s important to weigh the pros and cons of keeping your money in a joint account. Many people still maintain separate accounts in addition to a joint one. Here’s wishing you all the very best in your financial journey with your spouse. Don’t forget to work together and have loads of fun every step of the way!