Several recent surveys conducted on marriage indicate that disagreements over money, along with poor communication and lack of commitment and intimacy, is frequently cited as causes for divorce.
That is why it is important for couples to discuss their views on finances before they approach the marriage altar, and come to an agreement on how to manage monetary resources.
Is it best for a couple to keep separate bank accounts, or to open a joint one with both of their names? Should you report everything you spend to each other, or is it appropriate to continue to maintain separate accounts?
Taking some time to sit down with your partner and find answer to these questions before you say “I Do” can help avoid significant conflicts later.
Sure, many complications could test your marriage over the years, but you can keep disputes over money from being one of them.
Which account arrangement is best?
Every marriage relationship is different and has its own unique needs. Therefore, there is no “one size fits all” or “right or wrong answer” when it comes to deciding how your income will be categorized.
Below are the three most common account arrangements and the advantages of each:
(1) Joint account option
Many married couples prefer to simply place their income into one joint account that is listed under both names. Advantages include (but are not limited to):
• Provides a single joint account that is easy to manage.
• Has no limit on access to resources, which is important if one spouse is unavailable or dies.
• Paying shared bills and expenses from one account helps keep finances fair and prevents arguments over who should pay what.
• Creates better communication about money and understanding about the financial standing of the household.
• Fosters greater accountability, unity and trust in the relationship, with both individuals thinking less individually and more about how their financial decisions affects the other person.
(2) Separate account option
Some couples prefer to maintain their own separate bank accounts and manage their own income. This is common among people who marry later in life and have successful careers, or have complicated financial histories due to previous marriages, student loans or credit card debt. Advantages include (but are not limited to):
• Freedom and fairness for both spouses. Each person can buy what he or she wants and not be questioned about the purchase price.
• People with investments or other ongoing financial arrangements can keep the character of their funds as their personal assets (instead of marital assets.)
• Prevents financial complications and disputes over ownership if divorce or separation occurs.
(3) A mix of joint and separate accounts
A growing number of couples like to have a combination of joint and separate accounts. This means that one joint account is established to pay for common expenses such as mortgages, car payments and utility bills, while separate accounts are also set up for each spouse. Advantages include (but are not limited to):
• Allows household expenses to be paid while also enabling each person to pursue goals or interests that may align with those of their partner.
If you and your partner make roughly the same amount of income, you could contribute equally to the joint account, and keep whatever is left over for use in your personal accounts. Or a proportional system can be adopted if one spouse who earns (for example) two-thirds of the household income contributing two-thirds to the joint account, and the other person putting in the remaining third. Then both partners can do whatever they want with what is left over.
• An “adult allowance” system can be used which allows both partners to put their entire paycheck into the joint account, then withdraw a fixed amount for each person to use for whatever they would to purchase.
Other important financial questions to ask:
• How will unusual or extraordinary expenses be paid?
• Should bills be divided evenly, or according to what each person makes?
• Should separate bank accounts be used if one spouse has child support to pay?
• How can I gain access to my spouses separate bank account in a medical emergency?
• What kind of access should be given to third parties when joint accounts are used?
Contributing sources: Lawyers.com and smartmoney.com.
