Your Investments: Joint bank account for married couples?

Earlier this week on back to back days, I was asked by a newlywed couple and a single lady on the verge of getting engaged what I thought of married couples keeping separate bank accounts? The single lady started trying to convince me that each spouse keeping an individual account is a great idea. She showed me an article that appeared in the Israeli press recently about how this new idea is gaining traction, and how great the approach is. The idea is that each person have their own account and then they create a joint account where money also gets deposited to pay for utilities. This way they each keep their own financial

independence. I was given an example; “Let’s say my husband wants to buy a car that costs NIS 75,000 and I think that it’s a big mistake and he should buy some-thing in the 40,000 range. If he has his own money he can go ahead and buy the more expensive car!”

 

I was asked what I thought of that idea. I impolitely told her that I was appalled at the idea and it’s a recipe for marital disaster. I said it’s indicative of a much deeper communication problem, and this method is a great way to avoid being able to work out problems.

Divorce

 

Sonya Britt, assistant professor of family studies and human services and program director of personal financial planning, at Kansas State University conducted a study on financial issues and divorce. She writes, “In the study, we controlled for income, debt and net worth. Results revealed it didn’t matter how much you made or how much you were worth. Arguments about money are the top predictor for divorce because it happens at all levels.”

 

Go team go

 

Marriage is about teamwork, and as a softball coach of mine one said in an attempt at motivation, “there is no I in team.” If each side of the relationship is out for themselves financially, then neither one is accountable to the other, and disaster strikes. As I have written here more times than I care to count, the first step to financial stability is budgeting. Aside from the financial benefit of controlling your finances, budgeting makes the couple prioritize spending decisions, and they need to make those decisions jointly. It can’t be that one decides to treat himself to a new car and they can’t afford to pay for the electricity. Regarding the issue of combining finances, Dave Ramsey writes, “Money touches everything, so if a couple is fighting about money, that tension can also affect areas like trust, parenting or intimacy. But when a couple manages their money together, they’re agreeing on their hopes, dreams and goals – and on how to reach them. Plus, let’s be honest: Combining accounts is just easier. Ever tried splitting bills 50-50 in a roommate situation – writing each other checks and transferring money all the time? It’s a pain, and one you can completely erase from your marriage if you combine accounts.”

 

Second marriage

 

There is one situation though that I think does warrant separate bank accounts and that’s when we are talking about a second marriage. I see from my clients in this situation that they often choose to keep their accounts separate, and come to an agreement on who pays what. For example, the wife pays for the food and utilities and the husband pays costs associated with housing. The reason for splitting things when married for a second time is clear, especially if there are children from previous marriages. Usually both sides very much want to protect their assets to be able to help out children while alive or make sure that their kids are their sole inheritors.

 

Recently at a board meeting we were discussing creating a new model of how the board should work. I was very much against the idea. I was scolded by a fellow board member. He asked, “What’s so wrong with trying something new? What are you so afraid of?” In what may be a big understatement, anyone who knows me is aware that I am not the biggest fan of change. Why? There are many reasons I hate change but one of them is that if something has worked very well for a very long time I see no reason to throw it out for some new unproven idea.

 

Communication, especially in issues of finance, is paramount to a successful marriage. Don’t put your relationship in jeopardy. Make sure each partner is accountable to the other, and the best way to do this is to combine your bank accounts into one joint account.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.