Til Checks Do Us Part—Weighing the Benefits of Separate vs. Joint Bank Accounts

April 2016 View more

NMAG0416_Finance_iStock_000019627026_Large_800pxWhere to go on vacation. Which car to buy. Where to hang that picture.

These are some of the previously independent decisions that suddenly become joint discussions and debates as soon as two people say “I do.” It’s the timeless dance of marital compromise to which both parties willingly and happily submit—the day-to-day manifestation of two becoming one.

But in some cases, that quaint notion of shared everything stops cold at the bank doors. While married life is sure to be full of joint decisions and give-and-take, many previously untethered people nevertheless prefer to stay just that way when it comes to managing their finances after the wedding. Physical cohabitation? Yes. Financial cohabitation? Not so fast.

“It’s a very personal decision, and every couple is going to need to decide what makes the most sense for them and for their marriage,” says Liz Digani, a financial advisor at UBS Wealth Management in Chicago. “But even couples who have separate accounts need to know about each other’s spending habits, because they’re still going to be managing their overall finances as a household.”

Joint Considerations

There are certainly arguments to be made for both joint and separate bank accounts.

A joint account tends to promote trust for couples, since every financial decision running through that account requires communication and agreement, and given how many instances of marital conflict can be traced back to some type of money issue, the idea of promoting financial openness is surely a worthwhile endeavor. Joint accounts can often provide a fuller, clearer picture of family finances, making it easier to track spending and goals.

“When you have joint bank accounts, there’s a little more transparency in terms of what’s coming in and what’s going out,” Digani explains. “One study at UBS that looked at couples and finances found that when both individuals in the relationship are involved in the financial decisions, they both tend to feel more confident about their financial picture. So that’s a clear benefit of sharing a joint account.”

On the other hand, money and spending tend to be very personal areas, and not everyone entering into a marriage is quite ready to cede that individual control over something he or she has been solely in charge of for so long. Separate accounts can allow each partner to hold onto that sense of financial independence, while also helping each retain their financial skills and literacy as life goes on, as opposed to ceding that area entirely to the other person.

Splitting the Difference

One potential solution to the joint versus separate debate may be a combination of the two—a joint account for major shared household expenditures, plus separate individual accounts to help scratch that itch of financial independence and autonomy.

“I’m seeing where more couples will have one joint account where they pay most of their household bills and expenses, and then individual accounts where they can do more discretionary spending,” says Digani. “In other cases, couples may have a joint account, but with a spending limit that basically says that any purchase above a certain dollar level requires approval from the spouse. I actually see a lot of couples do that now, and I think it’s a great idea.”

Regardless of whether a couple opts for joint or separate bank accounts, however, Digani believes the key to any successful arrangement is to make sure that both individuals are fully aware and involved. Because unlike the taffy pull between a Caribbean or Disney World vacation, or the decision to banish those dogs playing poker to the garage, a family financial plan is a much more significant piece of a couple’s long-term health and happiness together.   

“Whether the accounts themselves are titled individually or jointly, what’s really important is that both people are involved in a more comprehensive financial plan, and that both are aware of what’s going on with the family finances.”