The Joint Bank Account Debate
Should you keep separate or create joint financial accounts when you get married? It’s one of those age-old hot personal finance topics. When do you know if it’s the right time to do it? Is there ever a right time if you’re not married?
I will tell you what worked well for my wife and I. However, I realize that I might somewhat be in the minority on this one (particularly amongst married couples). There’s really three options:
- Shared everything. All funds go into one share account.
- Everything stays separate in individual accounts.
- Shared account for shared expenses, individual accounts for individual expenses.
How my Wife and I have Chosen to Integrate our Finances with a Joint Bank Account
First off, we both work and have zero children. We have decided to have a shared joint account in addition to separate accounts. Here’s how it works.
- Joint Bank Account: We have a shared joint savings/checking account. In this account, we direct deposit a little more than we need for all basic shared expenses: mortgage, utility, insurances, food, etc.
- Separate Accounts: At the same time, we also have separate bank accounts. All funds that don’t go into our joint expenses account are direct deposited into these separate accounts. From the separate accounts we pay for individual expenses. My wife pays for student loans. I pay for expenses to run this website, for instance. When I bought a car, I paid entirely for the car (I have since sold it and bus to work).
Pros to the Joint Bank Account and Separate Account Option
- It forces you to be frugal. If you buy things together above and beyond your joint monthly budget, you have to transfer funds over from our individual accounts. It’s a constant reminder of what you’re spending.
- It forces you to be accountable for our own spending habits. There’s no animosity about what your joint bank account looks like.
- It forces you to budget for larger expenses like vacations, education, vehicles, etc.
- This is a great way to combine finances if you are living with your partner, but are not bound by marriage. If the relationship ends, you split the joint account that you’ve contributed equally to and go your separate ways.
Cons to the Joint Bank Account and Separate Account Option
- It doesn’t account for periods in a relationship when one partner has significantly higher income than the other. For instance if one person stays home to raise children or becomes unable to work, there’s not much alternative than to completely combine finances.
- It’s not as easy. It does require a lot more communication. For us, this is a good thing. For other couples, it might not be.
At some point (probably when we are forced to due to life circumstance), I expect that we will fully combine our funds. But for now, if it ain’t broke, we won’t fix it.
Joint Bank Account Discussion:
- If married or in a committed relationship, what type of financial account setup do you have?
- What problems or benefits have you seen from that setup?
My boyfriend and I have been together 3.5 years or so. Right now we divide the rent proportionally to our income and split other shared expenses (such as cable, electric, etc.) 50/50. Some of the things are in my name and others are in his, and we e-mail each other the running total and settle up any time the balance owed to someone goes over $100. He always pays the rent because he makes more than twice as much money as me and my paycheck doesn’t even cover the total rent.
The problem with this scenario is that sometimes we e-mail each other “the reckoning” at the same time and then have to figure out if everything gets included. Also if someone goes outside the budget for something like groceries, you better hope the other person can cover their half. And if I go over budget with my own individual spending (or he goes over his), then you kind of just have to hope the other person has enough to spot you for awhile. So far we always have, but it’s been close a couple of times.
We have been contemplating your system for awhile, largely because he can register as my domestic partner and get my tuition benefits, insurance, gym membership, etc. (I work for the state at a large U and have awesome benefits). But so far it hasn’t seemed urgent, at least to him – and since he’s the one who’d benefit from that setup, it doesn’t really make a difference to me. Once we’re married, we’ll definitely move to your system or something similar. We both work and don’t want kids, but he makes enough more than me that it’s not really fair to split our total income 50/50.
I did tell him that once we’re married, we should have not only a joint checking account that we both transfer $$ into every month, but also a joint savings account with 6 months’ combined expenses, and that he didn’t get to go out and buy anything huge/crazy with “his” money until that was fully funded, in case anything happened to either of us. It’ll mean that account will probably get funded proportionally like the rent, and he’ll contribute way more to it, dollar-wise, than I will. Since no one’s spending that money unless there’s an emergency anyway, he agreed that was fair.
When I get married, I am hoping to have a system where we have a joint saving and joint checking accounts – checking for the shared bills, and savings for emergency fund and joint goals (vacations, house, baby expenses etc). If there is a big disparity in incomes, everything gets contributed proportionally, and if we make more or less the same within a certain %, just contribute 50-50.
In case of one partner losing most/all of his/her pay, we’d have contingency plans where we trim our budget, scale back the expenses, and one partner picks up the other partner’s slack. Thats what being married is all about anyway, right?
Great. Now I just need to find someone willing to marry me. Anyone interested?
In my opinion, for 90% (or more) of unmarried couples – even in a committed relationship – completely combining finances seems like a monumental jumping the GunShark moment. Not just that, but it also becomes a huge tangle if something happens and the couple breaks up. Also, I am superstitious that way, so if you ask me, its just jinxing the relationship. Now if you are living together, having a joint account which has “slightly more than required” funds for shared expenses as GEM described would be a great idea. At least it eliminates the need to cut each other checks every month. But then again, I have never been a relationship of that kind, so my opinion is probably worth Zero. :)
We have a joint account where our paychecks are deposited. From here all expenses are paid, groceries, fuel, mortgage, utilities, household expenses, etc. We do a written budget every month and we talk about it together. From here we export money leftover according to our budget to various savings venues.
Then we each have personal accounts where we both get an allowance. Our allowance is equal even though our pay isn’t (about a 25k difference). To me it doesn’t matter who makes more, we split everything 50/50. This money is sort of free spending for us to support our personal hobbies. My husband likes to bowl on a league. I’m into photography. My husband likes music, I like books, etc. So every paycheck we get a direct deposit into our personal accounts that gives us free reign, whether we save it for something big or use it for something small, we never have to ask each other’s permission. We still maintain some independence and support personal interests.
Even cars I see as a joint expense, we both need a car to get to work and provide an income for both of us. We have a car savings fund always going for our next car purchase but we do drive our cars a very long time (or hope to). I also work further from home than my husband so my fuel cost is higher. But these are tools for earning our incomes so all expenses relating to that I feel are a joint responsibility, especially considering the difference in our pay.
The deciding factor for combining our accounts was when we were living together (to be married soon) and I had come through college with no debt and my husband made less than me and was taking a lot of effort to pay off his debt. I had all this money sitting around that could be used to help pay his student & car loans, the sooner they were gone the better for both of us. After we are married to me debt is debt, no matter whose debt it is.
We’re going to go with the shared everything route. Both paychecks get direct deposited, and all expenses (necessary or for discretionary purposes) come out of there (or through a shared credit card). We haven’t done it yet, but in the next few months we will (we’re getting married in June).
In California, which is a no fault divorce state, it doesn’t really matter if your money is split up in 10 little pockets or in one shared lump. Lawyers will split it up anyway. We’ve also been together long enough that all of our debts have been accrued while we’ve been living together (cars and student loans), so neither of us came in to the relationship with any money or any debt.
Simply from an organizational standpoint, since I’m the one dealing with the money for the most part, I think sharing everything will be easiest. We’re not frugal people, but we are far from impulse buyers, or credit abusers, so I have no qualms in us not having little accounts for play money and accounts for bills. Less complexity means easier tracking of spending for me at the end of the month.
One great benefit to using a joint account and sharing everything is that you force yourself to be accountable to your partner (unless your partner is one of those people that never really even bothers to check!)
@ Natalie – Agreed, debt is debt. And once your married, it’s both your debt. It’s inevitable that we’ll combine everything at some point, but there definitely are some positive benefits in having a joint and separate accounts at the same time.
@ Adam – Yeah, if you’re doing all the balancing, I can see the desire to want to combine everything for simplicity’s sake.
Nice read! i have had a similar experience with my wife. We combined most accounts. The only ones that stayed separate were our retirement accounts. We try to balance them equally though. I guess there isn’t a one size fits all solution, whatever works for the both of you is best.
Excellent post. Definitely the thing to remember is to do what works for you as a couple. I think some couples do it automatically because they think it is the right thing to do. My husband and I have a joint account for bills but everthing else is kept seperate because that just works better for us.
I married. All assets in our joint account. Such accounts are convenient because joint expenses – it more than 80 %. All the rest of the money we keep in cash and other card accounts.
My boyfriend and I have been together for over 9yrs and still keep everything separate. Though I do see us having a joint account when we eventually buy a house. I’m shy of completely joining accounts since the one person I know who did never spoke to her fiancee about what she or he was spending and overdrew their account almost weekly. My boyfriend is very much a ‘saver’ and he makes much more than I do so he never understands how I have so much less money than he does so to avoid conflict I think keeping it separate works best at least for now.