To combine accounts or not to combine accounts, that is the question
This week, I’m going to cover a topic that can get a little controversial. When people are in a committed relationship or marriage, most combine their finances fairly quickly so they can pursue financial goals together. However, in my line of work, I’ve come across a fair amount of couples who actually keep their financial accounts separate and still tackle bills and expenses together.
This week I’m going to cover the pros and cons of both approaches.
Aligning goals and priorities
No matter which approach you choose, goals have to be aligned and there has to be trust. For example, if your goal is to be an “all cash” family, increase your retirement outlay, or create an emergency fund, both partners have to agree they will contribute to the goal.
This not only applies to goals, but also bills. For example, one partner may want an expensive cable package and one may not. That has to be outlined before account structures come into play.
Combined accounts
The main benefit of this approach is complete transparency and cohesiveness. It usually works best for those living on one income. Both partners have access to all accounts, and all purchases and bill payments are viewable.
This is particularly beneficial on a combined income too, so both partners are accessing the same pool of money. If you choose this method, I highly recommend a mobile app to track expenses in real time, like Mint or YNAB, so you can see how much money is being pulled from a budget in real time.
A potential negative of this arrangement is what I like to call “spend judging.” Although both partners should ideally be content as long budgets are respected, if all transactions are visible, it’s easy to judge what the other person chooses to spend shared money on.
This can then lead to arguments or resentment.
Separate accounts
Even if someone is in a committed relationship, they may wish to be financially autonomous. This doesn’t mean they have something to hide, but money is a very personal thing. If you earn your own money, you may not want to justify your purchases.
I say, as long as you’re contributing equally to financial responsibilities and sticking to your budget plan, you do you. If it makes both partners more comfortable to maintain that level of independence, I’m not opposed. This can also increase mutual financial accountability.
If both partners are equally responsible for their portion of the household finances and tracking their spending, they’ll naturally be more mindful of budgets and how each spend impacts the family’s financial situation.
The biggest negative with this arrangement is that the amount of transactions goes up significantly, especially if you have children. For example, if a child wants to play soccer, both parents would have to either pay their part, or transfer money.
There can also be complications with income discrepancies. For example, if one partner makes more than the other, I recommend that they pay a larger percentage of the financial responsibilities so the other partner isn’t punished.
When it comes to successful marriages and relationships, I’m a firm believer that there’s rarely one right way to do things.
The number one reported cause of divorce is money. Depending on the spending habits of each partner, the pros and cons of both arrangements can vary greatly from couple to couple. It’s best to acknowledge your feelings outright, and don’t be afraid to adjust your method if you’re struggling.
Kat’s Money Corner is posted on Dollars & Sense every Tuesday. Kat Hnatyshyn, when not blogging or caring for her little ones, is a manager with CommunityAmerica Credit Union. For more financial chatter, visit http://communityamerica.com.
This story was originally published November 30, 2017 at 9:18 PM with the headline "To combine accounts or not to combine accounts, that is the question."