Here’s an age-old question for you —do you and your partner combine or separate your finances? Some couples (and experts) feel strongly that finances should be combined, while others feel just as strongly that finances should be kept separate. If you ask around, you’ll likely find people you know who take one approach or the other.
A recent TD Bank Survey found that 76 percent of couples said they shared at least one bank account, which means that just under a quarter of the couples surveyed keep their finances completely separate. The survey also found that Millennials were less likely to share —only 68 percent of Millennial couples have at least one shared bank account.
There’s no right or wrong way to manage your household finances – different strategies work for different people. However, there are some pros and cons to each approach. If you’re in a new relationship and are wondering what to do, here’s some things to consider:
Combining Your Finances
As a couple, there are a lot of reasons to combine your finances, and one of the biggest is that it’s simpler, especially if you have children. There’s no question about who pays for regular or unexpected monthly expenses, no discussions about fairness (especially when one partner makes more money). But perhaps most importantly, both partners have access to all the household’s funds, and on paper both are equally responsible for household expenses.
While most couples don’t plan for their relationship to end, separate accounts are beneficial in situations where a couple is going through a divorce. On the other hand, with separate accounts if one partner passes away then the surviving partner may not have access to funds when needed. Although the rules vary by state, certified financial planner Jennifer Black told The Globe and Mail that “the banks are pretty strict…I have seen situations where people cannot get access to the money at all. Usually, the bank is waiting to see a probated will."
If one partner works outside the home and the other partner is responsible for running the household, then Black suggests that a joint account is even more important to have in a time of crisis. Should an illness, death, or other unforeseeable event occur then arguably it’s safer to have combined finances and joint accounts.
Separating Your Finances
When it comes to separating your finances, there are varying degrees of separation. Some couples have a joint account as well as their own separate accounts, while others keep everything separate and each manages different parts of the household budget.
Couples who have developed a relationship later in life, or who come into the relationship with a lot of debt may feel more comfortable with separate accounts. Others simply want to maintain financial independence within their relationship.
“Over the years, I’ve had over a hundred spouses tell me how they wish they had their own money to spend freely without fear of judgement from their spouses,” says Sam Dogen of Yahoo Finance. Being able to spend your own money on hobbies, clothes, gifts, and other expenses without being held accountable to your partner is empowering.
One benefit of having complete financial independence is that it keeps lines of communication open as couples have to talk about money regularly in the course of their daily lives. Paying bills, for example, is more likely to become a conversation when money is separated.
Too often, when couples pool their money the responsibility of managing all the finances falls to one person. Not only is this a large burden for one partner to carry, but it can also leave the other partner feeling “clueless” about what’s happening with the finances, which is a dangerous situation to be in when an illness, death, or end to the relationship occurs.
On the other hand, separating finances requires trust from both partners – for this strategy to work you both need to trust that the other is managing their finances wisely, not racking up debt, and not doing anything underhanded without the other partner knowing.
Find Your Groove
According to Sonya Britt, an assistant professor with Kansas State University, “arguments about money is by far the top predictor of divorce.” It’s no wonder, then, that the question of whether to separate or combine finances is an important one for couples. So, how do you know which approach will work best for you?
"Couples should try different ways of handling the money to see what works for them," Ginita Wall, CFP and co-founder of the Women's Institute for Financial Education told Fox News. Ultimately, the best thing to do is to experiment to see what works. If the approach you take isn’t working, don’t be afraid to try something new. But most importantly, always keep the lines of communication open and opt for financial transparency with your partner, no matter which approach you take.
What do you think? Do you and your partner combine or separate your finances? What advice would you share with others trying to navigate the age-old question?