Separate or Joint Bank Accounts – Which is Better?

There was a time when such a question wasn’t asked. One marriage meant one checking account, one savings account, and even (gasp) one television. The “one TV” family disappeared long ago. Now, merged family finances may not be far behind.

In fact, according to Mint.com, a survey conducted by the Raddon Financial Group, reported in the Wall Street Journal, said 48 percent of married couples have two or more checking accounts between them.

The Case for Separate

Reasons for separate accounts, just like the reasons for joint accounts are many.

• Independence - This is especially important for couples who marry later in life, after each has accumulated some degree of wealth. Even when this is not the case, the desire to have personal control over at least some spending (or saving) can be a strong motivator.
• Past Financial History– When two people form a relationship, oftentimes at least one of them has had financial problems in the past – ranging from a low credit score caused by overextending to foreclosure. Separate accounts allow the person with good credit to maintain it – and the one with less than stellar numbers to improve on their own.
• Accounting Habits – Some people pick up their socks and underwear. Others don’t. Likewise, some people balance their checkbook on a regular basis while others wait for a bounced check to tell them it’s time to get out the calculator. Maintaining individual accounts avoids an argument.
• You Bought What?– Separate accounts also avoid arguments about either the frequency or relative wisdom of purchases.
• Alimony or Child Support– When one partner has expenses that relate to a former spouse, those financial arrangements are best kept separate.
• Inheritance– If your Uncle Joe passed and left you some stock or cash, he really intended it to belong to you. Keeping those assets separate is a way of ensuring Uncle Joe’s wishes are honored.

The Case for Joint

Putting all your financial eggs in one basket does have advantages as well.

• Simple Bill Payment– Let’s face it, if all your money is in one account, there’s no math involved when the mortgage payment comes due. Somebody writes a check and the deed is done.
• Learning to Share - Becoming a functioning couple starts with acknowledging that you are, in fact, a couple. Nothing says that more than sharing in both spending and saving decisions.
• Mutual Support– If one of you tends to spend first and ask questions later, while the other is more frugal, having a joint account allows for both control, when called for and “let’s do this for fun” when that is called for.
• Emergency Readiness– Every household has an unexpected expense from time to time. If you and your spouse are operating independently and an emergency arises, there could be tension about who pays. A joint account helps ensure that you can cover unexpected expenses without recrimination.

A Possible Compromise

In truth, both individual and joint bank accounts make sense – depending on the circumstances. So, why not have it all? The Wall Street Journal suggests maintaining separate accounts for day-to-day spending and a joint account for joint living expenses.

This system requires a little advance work for the joint account, but may be worth the extra effort in the end.

• Add Up the Bills – Determine which bills belong to both of you and add them up. This is what has to be paid out of the joint account. Shared expenses include mortgage, property taxes, utilities, and groceries to name a few. It’s anything that isn’t clearly the responsibility of one person.
• Develop a Contribution System – Chances are that you and your spouse do not have the same amount of income. Because of this, you and your spouse need to create a system for determining how much each of you will put into the joint account each week, or month.
• CFO or Committee? – Decide whether one of you will be the “bill payer in chief,” if you will take turns, or if you will share the duties. Sometimes one person has the time or expertise and the other person can take on another family task. All things being equal, however, sharing the job makes for better communication and less chance of someone feeling left out.

Another Option

Some couples, especially those who come into a relationship later in life, really prefer to have individual accounts and no joint fund. They list all shared bills and decide who pays which ones. It involves the same basic steps as separate accounts plus a joint account – except without the joint account.

The value of this system is that both spouses have financial responsibility and both have independence. The downside kicks in when the person responsible for paying the electric bill forgets to do so and the television goes off right in the middle of the newest episode of The Big Bang Theory.

Finally - the Unthinkable

No matter which system or hybrid you use, if separate accounts come into play there may be a problem if one spouse dies and the other spouse is unable to access those assets. The best solution to this problem is to establish all accounts as joint accounts, but agree that each separate account will only be accessed by the “owner” of that account.

This involves a certain level of trust between you and your spouse, but a relationship that shaky might be in trouble in the first place.