We've all heard a version of the old, romantic adage: "What's mine is yours." When it comes to managing finances as a couple, though, it's not always that simple. From differences in individual income, expenses and debts to varying attitudes about saving, budgeting and investing, some couples may find it easier to strike a compromise when managing household finances.
Joint Account or Separate Accounts?
Our parents and grandparents might have thrown everything into one pot, but for couples today, married or not, applying for a joint checking or joint savings account isn't necessarily a given. Both partners likely enter the relationship with an individual account – and according to a study by Bank of America, 28 percent of millennial couples keep it that way.
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Keeping Separate Accounts
With the prevalence of direct deposit, it's likely both people in a relationship are used to their paycheck going directly into their individual accounts. The same is true for automatic bill payments. Many of us already have payments set up for our individual expenses, like credit cards, student loans, subscriptions and services. Moving all of these things into one account is likely more of an inconvenience than a help.
If your annual incomes are vastly different, maybe you'll find a mix other than 50/50 works best to make things fair.
Advantages of Separate Accounts
Money matters can get stressful between partners. Surrendering the independence of separate accounts might be too much for some individuals – and for some relationships. Keeping your own account can be empowering in a good way by:
- maintaining financial independence
- keeping individual debts separate
- limiting arguments over money management styles
- removing the need to justify expenses
- easing the separation of funds in the event of break-up or divorce
- preventing one partner from being "in charge" of finances
There aren't many disadvantages to maintaining separate accounts, other than perhaps neither party has a holistic view of the total household income and expenses. Should you decide to invest in something big together, like a house, the conversation will have to get very transparent, and both partners will have to get what's "mine," "yours" and "ours" out on the same table.
Consider also: Joint Checking Account Rules for Secondary Signers
Joint Account Benefits
However, for the household expenses that you encounter and share as a couple, it may be worth opening a joint account for bill paying. Expenses that are indubitably split 50/50 may include:
- rent or mortgage
- basic utilities
- homeowners or renters insurance
- basic groceries
Once you know what those basic expenses add up to each month, you can each use your individual accounts to contribute a fixed amount to that shared account for paying bills.
If your annual incomes are vastly different, maybe you'll find a mix other than 50/50 works best to make things fair. You can add mutually beneficial categories to the joint account that you agree on contributing toward, such as vacation savings, investments or emergency funds.
Keep in mind that a joint account like this may be considered community property. In short, in the event of separation or divorce, you would both have rights to that fund, and it would be split up accordingly. Whereas your separate accounts may or not be considered community property, depending on where you live, if you are married and how you acquired the money in the account.
Consider also: Couples Should Take Another Look at Their Finances
A Mix May Be the Solution
Whether you are single or married, if you are living together, the idea of sharing expenses is going to come up. The best way to divvy up the household bills and incidental expenses is going to hinge a lot on you and your partner and what works best for you.
In addition to splitting up the less pleasant things, like bills and mutual debt, working together with finances can be beneficial too. You may find places where your financial goals align and discover common goals you can work toward as a couple. Shared financial aspirations can be something you contribute to together – even if you are working from separate accounts.
Consider also: Can a Spouse Cash a Joint Tax Refund?
- Cornell Law: Community Property
- IRS.gov: Community Property
- FDIC: Joint Acccounts
- Consumer Financial Protection Bureau: A Newcomer's Guide for Opening a Bank or Credit Union Account
- Consumer Financial Protection Bureau: Can I Remove My Spouse from a Join Checking Account?
- Women's Institute for Financial Education (WIFE): Joint Accounts During Divorce
- Bank of America: Better Money Habits - Millenial Report
- National Center for Biotechnology Information: Money and Marital Stress