Should You Have Joint or Separate Bank Accounts?

Evaluate the Pros and Cons of Merging Your Bank Account With Your Spouse

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Traditionally, when a couple gets married, they merge their money along with their lives. For example, that may mean taking shared responsibility for paying bills or developing joint savings goals. It can also mean combining their paychecks or other recurring income, such as tax refunds and cash gifts from the wedding, into a single bank account.

For many couples, a joint bank account is the ultimate symbolic gesture of their financial union.

But that doesn't mean it's a system that works for all couples. In  2016 TD Bank Survey, 76 percent of couples said they shared at least one bank account. That means roughly a quarter of couples keep their finances separate. Surprisingly, millennials were the least likely to be in favor of sharing bank accounts, compared to older generations. 

If you’re a newlywed, or in a long-term relationship, deciding how to manage your bank accounts is a priority. Weighing the pros and cons of both options can help in making a decision.

Benefits of a Joint Bank Account

Having one bank account offers a number of benefits. For example, sharing an account allows each spouse access to money when they need it. Joint bank accounts usually provide each account holder with a debit card, a checkbook and the ability to make deposits and withdraw funds. If your bank provides it, each of you would also have online access to account information and tools, which can simplify paying bills and other shared financial tasks.

 

Some legal affairs are also streamlined with joint bank accounts. In the event that one spouse passes away, the other spouse will retain access to the funds in a joint account without having to refer to a will or go through the legal system to claim the money. Depending on the state and local laws, the surviving spouse may have to go through a lengthy legal process to claim money in a separate account.

Finally, one of the main advantages of a joint bank account is that there's a smaller chance of encountering financial “surprises” when all money goes into and comes out of one account that both of you can see. Married couples with joint accounts may find it easier to keep track of their finances because all expenses come out of one account. This makes it harder to miss account activity, such as withdrawals and payments, and easier to balance the checkbook at the end of the month.

Drawbacks of a Joint Bank Account

While sharing a bank account can simplify your money management system, some couples may feel a loss of financial independence with a joint bank account, especially early in the marriage. With separate accounts, each spouse maintains an individual degree of freedom over their finances. 

One major drawback to sharing a joint bank account is that it can cause issues in a marriage when spouses aren't communicating about their account activity. Problems may also arise when one spouse enters the marriage with student loans, credit cards, alimony, child support or other debt that must now be paid with joint funds. This situation can often cause resentment in the other spouse, who becomes responsible for paying the debt as well.

To avoid money arguments, couples should discuss their separate debts in detail before deciding on which kind of banking works best for them.

A joint account can also be problematic if the relationship ends. If the couple decides to part ways, the funds in a joint account can be messy to separate. Each spouse has every right to withdraw money and close the account without the consent of the other, and one party can easily leave the other penniless. Separate bank accounts prevent that scenario and can allow for an easier break that often doesn’t involve a long fight to fully separate the finances.

Using Separate Bank Accounts

If you and your spouse prefer to keep separate bank accounts, you should have a discussion about it as early in the marriage as possible, if not before the wedding. Examining the benefits and drawbacks of all the options will help lay a strong financial foundation and ensure that each spouse is on the same page.

Couples who revisit their decision ever so often may also find success by making sure their strategy still works for them.

Having separate bank accounts doesn’t take away responsibility for either spouse. You still need to work through how bills will get paid, who is responsible, and have frequent discussions to reconcile your accounts and finances. You might also still choose to keep one or two joint accounts such as a joint savings account to save toward specific financial goals together.

Married couples can choose to maintain separate accounts and also open a joint account in which they deposit a portion of their income that they both agree on. This way, you both enjoy the benefits of a joint account while still maintaining the independence of divided finances. Couples can also choose to keep separate checking accounts and start joint saving account for vacations, down payment for a home, kids’ college tuition, or retirement.

Setting Financial Goals as a Couple

As you and your spouse decide on whether to establish a joint bank account or keep separate bank accounts, you may find that it’s wise to set financial goals together in either scenario. When having financial discussions, some questions to ask are:

What’s the approach if we pay off the debt we accumulated together or separately?

What’s the approach if we make investments?

How do we manage everyday spending on household purchases?

How will regular household expenses, such as the mortgage or utility bills be divided? 

How do we handle emergencies?

Have detailed financial discussions with your spouse frequently to determine what makes sense. As one financial expert has stated, come up with a financial blueprint on an annual basis so that you can think about how you are spending and budgeting your money as a couple so that you can enjoy it in the long run.