I've read a number of articles dealing with the dynamics of personal finance with couples, and one suggestion that pops up pretty regularly is keeping separate checking accounts for discretionary spending, or even for regular monthly bills that are in one person's name or the other's. The big motivations for doing this are freedom (“This is my money to spend, save, or invest how I like”), protection (“It's in my name alone”), and convenience (each person has a checkbook and access to funds at all times). There may be other tax-related advantages that apply to some couples if they have their funds separated, but I don't often read about these. Most of what I read about talks about the budgetary advantages of maintaining separate accounts, mainly as a means to simplify and define who spends how much.
I don't buy into this. My wife and I for the large part pool our finances. She has access to most everything I have and do, and I have access to everything she has and does. Separate checking accounts might keep a spendthrift husband from ruining his joint finances with his frugal wife (or vice versa) for a while, but this is a quick fix rather than a long-term solution. Separating finances like this helps to limit spending, but it also erects barriers that can be detrimental to the big financial picture:
- It puts up barriers to discussion about ongoing issues. Presumably there was discussion before setting up the separate checking accounts in the first place (and good reasons for doing so at the time) but there's the tendency to think that this will solve the underlying issues. “Well, you've spent all your money for the week/month/quarter.” It's tempting to just end discussion there, but if the marriage has any substance there will be discussion. But staring at a balance of $0 — or a rising credit card balance that's yours and yours alone — is impersonal, and shifts the issues away from the marriage and to the bank or the credit card provider, who don't care about your marriage issues at all. The discussion (battles?) should be between the partners.
- It may also put up real access barriers to see where money is being spent. This might be the case if one partner makes way more than the other. If finances are separate, it becomes easier for one partner (particularly the higher-earning partner) to hide spending from the other. Banks and credit card providers and businesses usually have strict policies, many of which are designed to comply with confidentiality statutes, not to discuss financial details with anyone except the account holder. One partner can barricade access to financial information that would expose spending patterns that affect them both.
- It costs more. This is probably the least important consideration in my thinking, but having two checking accounts lowers the average balance of either one, which may reduce the amount of interest either one earns. A lower average balance also increases the likelihood of bouncing a check. There are also two sets of checks to maintain, two sets of account fees, etc.
I just don't see any long-term benefit for couples to cordon off their finances like this. If a man and a woman decide to share their lives in a marriage, then control over their own lives and what they want to as individuals becomes secondary to what they want, and need, to do as a couple. Separate finances encourages people to put blinders on with regard to the other's finances, and also gives people the ability to hide things from the other. Joint finances, on the other hand, encourages discussion and brings all spending out in the open. It's far better if both partners know everything about their finances, because then they are in a better position to fix it.
We have had separate checking accounts for a couple of months now. I can see some of the longterm problems that you mention. We did it in order to double our bonuses. . . My wife does not work outside the home, so a portion of my check is direct deposited into her account and she is responsible for a corresponding part of the budget. We try to keep it "our money". Not his and hers.
My wife and I have a joint account that we both have access to, but we also have individual checking accounts tied to it. We rarely use them, but we keep them because they are already set up and it makes it easier to shop for each other for gifts. We never keep more than necessary in either account. For us, it works. I think the most important thing is to find a system both people are comfortable with.
I don't know. I can't imagine sharing my finances with someone else in that way. I can see why you might do it for ease, but its like you don't trust your partner to stick to the joint plan, you're worried that they'll spend all their money.
While I think you bring up good points, I think the type of system that a couple has to manage finances is less important than having open and frank discussions about your current and future financial situation. Taken to the extreme having seperate accounts can put up barriers that can be determental to a relationship. But hiding money can easily be done whether you have one account or seperate accounts. Having seperate accounts can give both people in the marriage a certain level of independence that they are comfortable with. While it is important for couples to make decisions together, it is also important to maintain a level of individuality
We're working on joining our accounts. But at the same time, we both plan to get "allowance" accounts for our personal spending money. We may not do that until we actually have more personal spending money… 😉
It's stressful right now, trying to figure out which account should pay what. Not based on the person, but on how much money is in the account. Double chance of overages, too.
I agree with John M, the important part isn't whether it is a joint account or separate accounts or a combination. The important part is that both sides are comfortable with the arrangement and how it works for your dynamic. If you are keeping separate accounts because of trust issues, then you might want to reexamine your relationship. If you are keeping separate accounts because it is part of an agreed upon cash flow, then go with what works for you.
All of our income gets direct deposited into 4 main accounts. The portion that we use from month to month to pay monthly expenses gets put into a joint checking account. A small portion gets deposited into his/her accounts. The balance into savings.
The his/her accounts is money that is budgeted not to be budgeted, in other words "fun money" – things we can buy without having to make sure it is in the family budget or plan. Also, it makes buying each other gifts much more convenient because we don't have to worry about the paper trail being seen.
We keep everything else in the open. We both have access to the bulk of our net worth (ie everything not in individual accounts). We both discuss what the monthly budget will be – categories as well as amounts. We both discuss what we want to save for and how much to save.
Oddly enough, one could see the need for everything to be together to be a form of mistrust as well. I have to trust that my wife will keep up her account, that she won't overdraft her checking or use her credit card to excess. Technically, I could monitor these if I wanted – but I think it is important to give some autonomy
We have three checking accounts… Two joint accounts (one is our "main account" for bills / bill payments – the other is for "day-to-day" stuff) – both of these accounts have my name and my wife's and we both write checks out of them, based on our family's budget. — The third account is an ING electric orange that I use for "business related" expenses. As for "sharing money" – what's mine is hers, what's hers is mine…
NCN
I'm totally with you on this. It was weird combining finances at first, but you're absolutely right that it led to open and frank discussions. We have agreed on shared values and goals, and we work together to improve our family's financial situation. I see no reason for us to separate anything.
Thanks for the comments everyone!
John M: Yes, good discussion is the end goal. I've seen the flip side in other situations.
Patrick: My wife does have a PayPal account in just her name. She's surprised me with some gifts from eBay that way.
NCN: The phrase is slightly different in our house: "What's mine is hers, and what's hers is hers." 😉
It is really difficult to share your account information with some one else , you really need a trustworthy person for that, and those person are very rare. So I am in favor of separate accounts.
I really like the idea of this, especially now that my wife and I are stable enough financially that one of us taking out money from the ATM wouldn't make the other bounce checks.
But my main hesitation is when it comes to gifts. The smaller "gifts" I could learn to live without – we love treating each other to coffee or restaurants. But what about birthdays and Christmas? I know we could keep our current accounts, but since we would both have direct deposit into that joint account, how could you justify tranferring money out to "your own" account?
One option I can think of is having an automatic $50 or $100 transfer to each account every month, which can serve as spending money like someone else mentioned above. Is that similar to what people do?
@ Jon, Him and Her at Make Love Not Debt divert $75 of each of their paychecks into their "allowance accounts." That waythey each get $150 of automatic personal money per month. It's in their take-home budget and such. I don't know if they do it automatically or not.
http://www.makelovenotdebt.com/2006/04/oneyear_up…
My wife and I have had separate accounts for about five years now. In the past month, we have decided to open a join account, though we will probably keep our separate accounts as well. We made the decision to simplify paying the bills. We found ourselves transferring money very frequently and it made it harder to plan for large payments. Not sure yet if we keep individual accounts too. I know for me, it did make it easier to spend money that I shouldn't have, though that is a spending problem, not a bank account problem. 🙂
My wife and I had combined our finances when we got married. Problem was neither of us was very good at controlling our spending. Despite budgeting, having access to a large pool of money in a joint chequing account was too tempting for both of us.
This year, determined to bring our spending under control and reinstate our budget, we decided to open separate chequing accounts.
Here's how it works:
We have one joint chequing account, savings account, and credit card. Each of has our own personal chequing account. Our paychecks get deposited directly into our joint account and each week an equal amount get transfered into our personal accounts. This money we can spend as we with but that money is not just "blow money", any personal spending like clothes, haircuts, etc. also must come from that account. If I want the latest gadget or pair of shoes and my weekly allotment doesn't cover it then I may have to forgo a few beers with the guys and save for a few weeks to afford it.
We use the credit card for all joint purchases (gas, groceries, dinning out, movies, etc.). The joint checking account, which holds enough of a balance to cover one month of expenses, is used strictly to pay for all our monthly bills. The rest goes into our shared high-interest savings account.
So far this system is working great for us and has tamed our wild spending. In January we'll review our budget and weekly allotments and decide if there's any adjustments needed.
We each get an "allowance" every paycheck. Everything else goes to joint and then out to investments, debts, long-term savings, etc. The separate allowance accounts keep us sane in a lot of way. They are our fun money so neither one of us feels too constrained by the budget. It prevents arguments. If he wants to spend more on shoes and I want to eat out for lunch every day, it's our call. And as several people have mentioned, it is nice for gifts and surprises. We "treat" each other to dinner occasionally and its fun!
I would add, though, that it is in no way secretive or a way of hiding spending problems. We both know very well what we each spend our money on. We created the allowance number jointly and are both comfortable with it.
A little freedom with some funds has one make us feel independent, yet not co-dependent.
"protection (”It’s in my name alone”)"
I think you are making a flawed assumption that the protection is for the account holder.
In my state, if my wife and I go into the marriage with separate debts, by keeping the accounts separate, it would be easier to prove that I am not responsible for her pre marriage debts and vice versa. Separate accounts therefore protect the other person from your debts.
So Why keep debts separate? Well for one example, if I suddenly die, my wife won't have to pay back my student loans.
Though you present some food for thought, it seems that you have made some basic assumptions about marriage that don’t necessarily apply to everyone.
First, you assume that the default state of any married couple is to have only joint financial accounts, and that something must have happened to cause them to reconsider. I see it quite the opposite: both come into the union as individuals, with individual financial accounts. While certainly natural to combine some – probably most – finances upon marriage, there would have to be some specific reason (IMO) to decide to fully combine accounts. The default state, I think, is to have separate accounts.
Second, your idea of marriage seems to me like some sort of Borg-like creature, where each member’s primary concern should be to further the cause of the unit, brushing individual needs and privacy aside. I have to admit, that notion seems naïvely idealistic at best, and downright controlling at worst. If my husband and I agree on how much we each contribute and how to allocate our joint finances, why should either of us care how the other spends their own personal money? I’m not the boss of him, he shouldn’t need my approval to use his money as he sees fit, and I’d expect the same courtesy from him.
I do agree with your underlying idea that communication is key. I don’t agree, though, that having joint finances is a de facto means of achieving that.
My husband and I always have had separate accounts, and it works great for us. We divided our regular bills equitably, so there's never the issue of who pays what. If we have to purchase any big ticket items, we discuss it and work it out. We have goals that we want to achieve as a family, and we both trust that the other person is taking care of their part to reach those goals.
I admit that I like being financially independent. I like that I can spend my hard-earned money without having to explain myself to anybody. This is not about hiding anything. If my husband asks me how much money I spent on something, I tell him. This is about being able to provide for my own future. What if something happens to my husband? I may be overly dramatic here, but the truth is that many women are still ignorant about finances, and if they become single they don't know what to do. I have two children that I need to provide for. It gives me great comfort to know that if something were to happen to DH, I can take care of my kids.
My husband and I were each middle age when we married. We had each been able to spend, save, etc. our own money. We discussed the joint checking account and opted to maintain two seperate but joint accounts. "His account" has his name as the primary account holder. "my account" has my name as primary. We each know what is in our accounts, but have a spoken agreement to not access the other's account unless a real emergency pops up such as sickness or death. Each of us has our monthly financial obligations and if either of us wants to make a major purchase, we have agreed to discuss the matter prior to spending. This system makes complete sense and we trust each other enough to make our arrangement keep working.
My boyfriend feels strongly that if we were to marry that we should have separate checking accounts and that all of his money would be "his" and all of my money would be "mine." I had always imagined that I would have a joint checking account with my husband and that we would see everything (assets, income, etc.) as "ours." My boyfriend makes more money than I do, and he feels that after he contributes to half of the mortgage, utilities, etc. that the rest of his money is his to spend as he chooses. I pointed out that I might easily run out of money after paying half of the shared expenses, and he said that he would be willing to give me an allowance but he feels that I should be grateful for that allowance since he would be giving me some of his money. I would appreciate any insight…
J, if your fiance doesn’t trust you to share something as relatively trivial as money, you may have some real issues. Money is fleeting – the person you choose to marry will have his/her hands in far more precious and irreplaceable things than finances.
At the risk of overstepping some boundary, J, your boyfriend has some growing up to do. Marriage today is an equal partnership. You aren't a subordinate. This isn't 1950.
Again, if this guy doesn't trust you enough to have a shared pool of money, are you sure you trust him to share your LIFE?
You must not be married, when your'e married there is no privacy.
I have been struggling with this issue. My husband and I have been together for 1 year and have always kept things separate. I make more money than he,but only by about $10,000, yet because of his spending habits, I end up paying all our joint bills, mortgage, utilities, groceries, etc. I debate whether joint checking would help, because I could track his spending, or it would be worse because then he would have access to more money.
My husband and I are newlyweds. We have three checking accounts. His, hers and ours. We don't plan on keeping things like this forever, but we think it's a good idea for now. We make around the same amount of money (he makes a little more, but his car payment is higher) so we deposit the same amout into joint checking and into the joint savings each month. It's helping us get used to handling finances together. I use my personal checking account for paying on the credit card I had before we were married and my car payment. Right now we pay for our own car insurance and cell phones, but of course once those are combined they will come out of the joint accout. We think it will be easier to use one checking account when there are less "his and hers" bills and more "ours" bills.
Laura–I agree.
My father recently left my mother shortly after their 25th wedding anniversary. I stopped by her house yesterday afternoon to find my 19 y/o brother teaching her how to balance her checkbook. She has no clue what she has, as far as assets and debt are concerned. She works, but she was really never involved in the finances while her and my father were married. It's sad…
I'm sure the answer to this is that we are all individuals, and as such our marriges/partnerships will also each be individual. However for my two-pennethworth;
I earn the majority of the household income and my other half earns a misely amount (maternity) following the birth of our daughter. We pool all income into a joint account, from which all bills are paid, we share (my) flat and both of (my) cars freely. The joint account is fully budgeted and agreed on with amounts spent on savings / mortgage / one-off large expenses etc discussed. However, we each also receive a monthly "allowance" (the same amount), privately and under our individual control. This way there are no arguments about new shoes / handbags from me or PC or DVD purchases from her. Seems to work so far….
Hi Chris,
I know that opinions are opinions and everyone is entitled, but wow, your true feelings seem to speak volumes. Why do you resent your support of your wife and your child? I applaud you not verbalizing your animosity towards your spouse; she did carry your child and most likely takes care of the child and your home.You should read your own post. You write about her misley money. The rest is about your flat, both of your cars, and your majority of income. You state that you freely give, but I truly doubt your honesty. I am unsure what she actually does, but by the tone of your letter she most likely pays for being the wife of such a miser.
Cylon
I think that my fiance and i will go with three accounts, 1 joint, 2 separate. Besides the obvious advantages to privacy during gifting, there is also the idea that one person shouldnt control the others habits, at least not without a frank discussion of common goals and the like. If she wants to have starbucks every day, she should be able to. Conversely, if i want to eat at Burger King this week, I should be able to. If I run out of money too soon, lesson learned, or maybe an adjustment to our budget is in order. Same goes for her. As to the person whose boyfriend earns more than her, but only pays half….get out now. If he can't be adult enough to realize the percentages, he obviously doesnt care about you or you guys.
Cylon,
Have a few issues, don't we… This discussion is about finances, not how women should be praised (as well they should) for bearing children. You sure seem defensive after Chris' post that lists relevant information about his situation. Their "allowance" is equal, regardless of wages made by either. So her wages are misely in comparison, so what? He still loves her and trusts her enough to pool their finances together, not separate which seems to clash with your notion that he despises his wife and child who benefit from his cars and his flat. What did you miss? Don't beat the man over the head for taking care of his family. Sheesh!
Yes Chad, each of has our own set of issues; evident by the way you "beat me over the head" with your two-cents. Unfortunately, I am an advocate who works with victims who are involved with controlling and abusive jerks. I really did not intend to "ruffle" anyone's feathers. I do have an observation and a question. Chris did not take offense to my observation. Why did you take it so personally?
Good point here. When I was a stay at home mom, my husband always reminded me that he was “carrying me…” and now that I work, he still reminds me that he “carried me all those years.” Heck, I took care of OUR 4 kids…all those years…until all went to school. Now, I work full time, make good money…and don’t see any of it, bc he spends it all. We are considering separate checking accounts, which, I bet will eventually one day lead to separate lives…
I am completely frustrated with my husband and trying to talk to him about joining finances. I have brought the subject up at appropriate times and with ease and not to come “after” him. He came from a horrible marriage that destroyed him financially. He has nothing saved and his house is in foreclosure, his name only on mortgage and he is over 40. I throw up my arms everytime he spends spends spends on golf attire, clubs, etc. I on the other hand would like to buy a house and have more out of life. I have tried to set up a budget and he always makes excuses as to shy he can’t save, but he will spend 400 dollars on new golf clubs. I just don’t understand his way of thinking. It’s like he doesn’t worry about tommorrow at all. Since his credit has been destroyed he has asked me to co-sign a loan for a new piece of equiptment for his buisness. Why should I if he can’t save money towards it, plus if he decides to get pissed off at me and leave I would be the one paying for it.