Separate Bank Accounts: 'Till Death (or Banking) Do We Part?

Photo: finsec

Many couples today boast separate bank accounts and successful relationships. But is it possible? Or are separate bank accounts a recipe for disaster?

In this day and age, anything goes. Common-law relationships can be accepted to be as serious as married couples, and married couples can be as independent from one another as two strangers. I have seen both first-hand.

So how do couples navigate through the sticky world of finances in this brave new world?

First of all, I can't stress enough that communication about finances is the key to a happy relationship. The number one thing couples fight about is money, and I believe many relationships can be saved (or avoided) with proper communication about finances.

It's funny - people are more comfortable sitting around the dinner table and talking about their sex lives before they're comfortable talking about money. Why is this? Is it a dirty or shameful thing? Do our personal money matters hold some secret key to our identities?

In any case, I don’t think that anybody can dispute the fact that proper communication about finances can avert some of the worst financial and emotional disasters.

It is my personal belief that separate bank accounts can be a good thing for relationships - as long as it is accompanied by proper and full communication.

Managing your own bank account (even if you are part of a "till death do us part" duo) is empowering, and a life skill that nobody should be deprived of. It brings personal accountability, budgeting, and a sense of financial pride to the owner of the account, no matter what the balance is. Even slowly digging your way out of debt is something to be proud of if you can say you did it on your own.

I once met a guy who was living with his girlfriend, and their only checking account was held jointly. He transferred a substantial sum from his savings over to their joint checking account, with the intention of withdrawing it the next day to purchase an engagement ring which he had been saving up for ages. As luck would have it, the girlfriend happened to be doing some online banking, saw the balance, and immediately applied it to some household bills without wondering where the money actually came from. Needless to say, the engagement was held off for a bit!

I actually see a few problems with this situation. Not only was it sad that the boyfriend was bamboozled out of presenting the engagement ring on the perfect occasion due to the joint account, but I am surprised that the girlfriend didn't first wonder what that money was doing in the bank account before paying bills with it. If the couple had proper financial communication, the bills would have been properly budgeted for, and extra sums of money wouldn't immediately be applied unless there was a conversation about it first.

Some would say that separate bank accounts indicate a lack of faith in the relationship. I would hope that a testament to commitment in a relationship can be deeper than names on a bank account, and in fact I have seen many a divorcing couple separate their joint bank accounts too. So joint banking is certainly not a way to cement a relationship.

Another argument for a joint account is to pay for joint assets, such as the house, bills, kids, and other miscellaneous joint items. Some couples successfully navigate this through the use of a joint account specifically designated for bills, but still maintaining separate primary accounts. Each member of the couple deposits "x" dollars each month into the joint account to cover off the bills.

This can be a very effective way to manage the finances. It still requires a certain amount of communication to budget the optimal amount of money required to cover the bills (since mum or dad doling out twenties for the kids' miscellaneous expenses can add up quickly if it isn't accounted for), and this method allows each person to have their own financial independence with their individual accounts.

It may, however, entail a few extra monthly fees to maintain a third bank account, depending on the financial institution and services used.

In any of the serious relationships I've had (which includes marriage), there has been no problem with maintaining separate bank accounts, even to cover the joint bills. Usually one person takes care of a major monthly expense (such as living expenses), and the other takes care of the rest. When one person paid more of the joint expenses than another, we simply reimburse each other for the difference. The trick is we have always been lucky enough to have sufficient financial communication and budgeting to make anything work.

And if your relationship is solid, you too can communicate your way through to a system of budgeting, accountability, and empowerment that works for everybody in the family. Even with separate bank accounts.

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Guest's picture

I believe you nailed the issue with our ability to discuss our sex lives with friends and our inability to handle conversations on our money. Do you think it is a fear of judgment or a fear of people wanting to borrow our money? There is definitely a taboo on discussing personal money stats. On the couple aspect of your article communication truly is the key. I don't believe separate accounts are a big deal. But to live up to their true financial potential as a couple, consistent and regular communication must take place. That will allow them to know where they are at, where they want to be, and realistic ways to get there.

Myscha Theriault's picture

One thing I've noticed is the more secure people are with their money skills, the more willing they are discussing it. People who are successful with money, at least in my experience, are more comfortable talking about it, at least sooner within a new friendship than I've noticed otherwise. Haven't done a huge scientific study or data collection project on this though. Just something I've observed. Any thoughts, Wise Breaders?

Guest's picture

My husband and I have been together for seven years, married for almost five. We've never shared a bank account, but for practical reasons. Neither of us likes to have to write down what we've spent (just because we're not always near paper, what if we forget, blah blah blah), but we're both EXCELLENT at doing it in our head. (We both use our debit cards heavily, for convenience reasons.) I know what my balance is and he knows what his is, but it would complicate things if we had to remember each individual amount and such. I might know my balance, and I know approximately how much each purchase was, but I would have a harder time thinking "Ok... it was this, but then he spent this" etc. It has nothing to do with not trusting each other with our money. If I need money, he gives it to me. If he needs money, I give it to him. It works. We like it this way.

As far as bills go, I give him a certain amount from my check. He pays the bills, except for Netflix and groceries, which I pay for. Of course, the amount I give him takes Netflix/groceries into account, but he has the bigger bank balance (read: he makes more money than me), so if there's suddenly something unexpected, he can cover it better than I can. I know what all our bills are, though, and how to pay them, should the need arise.

Nora Dunn's picture

@Dawn: I noticed you have been writing about just the same topics lately! There seems to be something in the air....stay tuned for a follow-up post on how we communicate about money and the associated taboos.

@Myscha: You got it! People with money don't generally have so much trouble talking about it. In fact, I read an article recently about how your own personal money matters are actually determined by the company you keep! I'll bet that openess and sharing strategies has something to do with it.

I have also noticed that sometimes people who don't have any money tend to judge those with money harshly, propagating some stereotypes. But all that does is push them further into a financial situation they don't want to be in.

@Misa: Thanks for your input! By purchasing things with debit cards, you have easy access to spending reports through online banking. You can quickly determine how much each party has spent over the month, and as you said, one person can reimburse the other as needs be. I prefer debit and credit to cash for this reason. I'll sometimes even charge items under $5.



Guest's picture

My partner and I have our own accounts, as well as a joint checking account which we use for household expenses. Each month we deposit a set amount into the joint account to cover our budgeted expenses, plus a little extra as a buffer. It works really well for us. It allows us to keep our personal finances (credit cards, student loans, etc), but still have things we're jointly responsible for together and well-discussed.

I know another couple who has a similar system, but they both freelance, so they each put a percentage of their income in, so their responsibility is based on however well they're each doing at the time.

Nora Dunn's picture

I had wondered how couples who have joint accounts for the bills and variable incomes cope with the division of expenses. And that's a great idea to deposit percentages of income. Hopefully their incomes are large enough to cover off the expenses, but not so large that the predetermined percentages would be too much. I guess it all evens out in the end.

I have a question for those who use the joint account method: How do you pay for everything out of that account? Is it online and debit? How do you navigate paying for things with cash or personal credit cards (when using a credit card is necessary)?

Guest's picture

My wife and I have two joint accounts: hers and mine. Both accounts contain "our" money and are joint accounts with both names on them, but she manages that one and I manage this one, precisely to avoid the need to have a conversation before every use of the cash card.

Guest's picture

After automatic deductions for thinkgs like employer health insurance and 401k contributions, my wife and I "skim" an allowance off the top of each paycheck into our personal bank accounts - and deposit the remainer into our joint account. We both skim the same amount from each paycheck, and this creates a feeling of equality.

The joint account pays the mortgage, insurance, buys food, etc. We keep the joint at a balance equal to about one month of our cash "burn rate".

If the joint account gets "fat" we trim some excess into our joint investment account (pretty much a quarterly activity) which we invest accordance with our mutual investment objectives (vacation fund, emergency repair fund, Christmas fund, and long term invetment fund). When it gets lean (and we both watch it) we reduce our "variable cost" expenses (entertainment, lavish dinners, eating out, etc).

The seperate "allowance" accounts are great for buying gifts for each other, having a guilt-free night out with friends, and other "indulgances".

Everybody will find a system that's comfortable for them.

Nora Dunn's picture

What a great system David! You seem to address all the crucial points for good financial management within a relationship: having something individual for gifts and other indulgences, paying for the bills with equality, and communicating and monitoring your investments and cash flow lots.

Thank you for sharing! 

Guest's picture

I agree with David. My husband and I also put our allowances into separate accounts and have one big account for the joint stuff. Really, we only have separate accounts so that all those little, day-to-day purchases don't have to be tracked by both of us.

Personally, I think it's better than the method of each person having a separate account from which they contribute to a household account. Better from the standpoint of encouraging financial togetherness. I think it's important for a couple to think of their joint account as primary: Deposit all your income there, pay your big expenses from there, make your big (savings, investing) financial decisions there.

Among the people I know, those couples that view their individual accounts as primary and their joint account as a huge monthly expense that needs to be paid tend to have more angst about money.

Guest's picture

I'm thinking of doing a joint account but it makes sense to also keep a separate savings building on your own life lessons in finance as well.

Dwight Anthony
Financially Elite Blog