Joint or Separate Accounts: How couples can manage their finances

*As couples in today’s economy make a decision that works best for their marriage, part of this conversation should start with setting financial priorities together, understanding each other’s values and aspirations, and where there are commonalities and differences

Oluwatosin Olaseinde

Managing money as a couple can be tricky to sort out with two sources of income and two people with different backgrounds and financial perspectives.

While you’re trying to manage money jointly, there could be major differences in income, especially when one partner is the clear breadwinner, or the other half is responsible for managing groceries or paying for the children’s education.

So, whether you’re just going into marriage or you have been married, managing your finances properly in a way that will not lead to conflict in your home is very important. Here are different accounts for managing your finances, as well as the pros and cons of each.

Separate Account

Separate bank accounts could be an individual’s savings or checking account, owned and controlled by an individual. This type of account will work for couples who simply like to maintain their independence.

If you and your spouse can agree on a fair way to split bills, maintaining separate accounts could be a good option.

Pros

It encourages freedom: Separate accounts allow each partner to retain their financial independence and spend or save however they want.

It is easy to part ways: Separate accounts prevent a situation in which a marriage goes bad and one spouse cleans out a savings account, leaving their partner with nothing.

Cons

Lack of trust: Couples who keep their accounts separate may be more likely to hide financial secrets from their partners, and this could breed lack of trust in the home.

Difficulty in achieving goals: Most of the time, the interest of the individual is above that of the home, and this makes it difficult to reach major milestones such as building houses, paying for children’s education, etc.

Joint Account

A joint bank account has more than one owner and operates like the individual savings or checking accounts. The account owners may be business partners, spouses, or even parents opening up a bank account for their children’s education.

Pros

It encourages information sharing: Couples are able to know each other’s earnings as they grow in their marriage over the years. Each person understands what they have jointly earned in any particular period.

In the event that calamity befalls either person, the surviving partner has a full understanding of what is left in the account.

It encourages effective planning: When a couple has a joint bank account, they see what is coming into the account everyday and can plan adequately without prejudice from each other.

Helps with saving and investment: Once the money is in the bank, the couple just needs to agree on investment decisions. It could be towards buying a property, owning a company, buying shares, etc.

Cons

Loss of financial independence: The couple needs to report every money spent and take permission before they can make any money decision. Some people, especially men, don’t feel comfortable with this kind of arrangement.

It’s problematic if the relationship ends: If the couple decides to part ways, the funds in a joint account can be difficult to separate.

Each spouse has the right to withdraw money and close the account without the consent of the other, and one party can easily leave the other penniless.

Hybrid Account

While there are benefits to both joint and separate accounts, the best way to manage money in marriage could be a combination of both.

A combined account will allow couples to fund one joint account for household bills and then divide up personal spending cash in separate accounts.

Another option is to have couples deposit their salary into separate accounts and then transfer an agreed upon amount to a joint account to pay bills. Either way, it’s wise to create a mechanism such as a power of attorney (a legal document or transfer) on death provision, that allows each spouse to have access to cash in separate accounts should one person become incapacitated or passes away.

At the end of the day, couples need to make a decision that works best for their marriage. Part of this conversation starts with setting financial priorities together, understanding each other’s values and aspirations, and where there are commonalities and differences.

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