With wedding season around the corner, couples are preparing to walk down the aisle to start their new life together. While right now the focus is on decisions regarding flowers, dresses, invites and photographers, couples also have to make a longer-lasting decision: whether to share bank accounts.
Experts say the conversation about money should start early, preferably before a couple is even engaged. “You have to have discussions on the front end, long before the wedding day,” says David Giancola, director for Merrill Edge. “You’re going to spend the rest of your life with this person, and you need to know them from an emotional and financial standpoint. It’s a very sensitive subject, but the conversation about money shouldn’t be avoided.”
Whether one person’s a spendthrift and the other’s a saver isn’t as important as understanding each other’s financial values. “Values come from a combination of your experience and upbringing, or how your parents treated money,” says Tracy Stewart, certified public accountant and personal financial specialist in College Station, Texas.
And just because half of the couple is a spender while the other is more thrifty--that doesn’t spell financial disaster. “If values aren’t the same, that’s okay as long as we understand and are tolerant,” says Michael Goodman, certified public accountant and president at Wealthstream Advisors, Inc. “In a household, couples should work as a household.”
Giancola suggests couples share their credit scores and review each other’s debt situations before walking down the aisle. “Put together a personal financial statement where you look at assets and incomes together as a couple,” says Giancola. “You want to make sure you know this person from a fiscal standpoint so you’re not blindsided as you build your life together.”
If a couple is facing debt, he recommends having a debt reduction plan in place to pay off debt prior to the wedding or deciding if this will be a shared expense.
Before deciding whether to have a joint account, experts suggest discussing whose incomes will be used to pay for household expenses. No matter how a couple holds their money, if couples don’t agree on goals like having children, buying a house, or taking vacations, for example, they can still have problems, says Stewart. “These can change over time, but both people need to be in agreement when they achieve these goals and when the goals change, whether their accounts are separate or joint.”
Creating a household budget helps couples to understand how much their new life will cost. “You should have six-months living expenses in reserves, put 15% of your gross income towards long-term savings, paid down credit card or other consumer debt, and paid all your monthly expenses,” says Goodman. “What’s left over is discretionary and can be split.”
Some couples have joint accounts to pay household expenses and for savings, with separate accounts for discretionary spending. Even though each spouse might have their own accounts, “you have a shared life and shared goals that you’re not keeping separate,” says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards and author of "Women's Worth: Finding Your Financial Confidence."
Separate accounts can provide spouses with more autonomy towards spending money, says Blayney. When each person has their own accounts, regardless of whether they have a paid job, no one feels like they have to have a secret account.
“Joint accounts foster transparency, but only if both spouses understand the activity in the account. If one person isn’t watching the money and not taking advantage of having a shared account, you can still have distrust later on in the relationship.”
“The trend is to have separate accounts and a joint account for household expenses, especially if both spouses are professionals,” says Randy Kessler, founding partner of Kessler & Solomiany. “If it works for you, then you should do it. You have to listen to your heart. It’s easier for a divorce if you keep your money separate, but it’s better for a marriage if everything’s in one pot.”
Keeping money completely separate gives both spouses complete autonomy over their money which can be good if they have significant differences in spending habits, says Goodman. Even though money is held separate, couples still need to discuss larger household financial issues like cars, vacations, home improvements, and children’s education.
Sometimes, having completely separate accounts can exacerbate the conversation about money. “There can be lots of friction because a couple has to talk about every expense each month,” says Blayney. “You want to eliminate as many of the ‘at the cash register’ discussions as you can. A relationship doesn’t need the stress of talking about every shared financial obligation.”
No matter whether accounts are shared, couples should consider who will manage the money. “When you have separate accounts and manage your money separately, if one account grows and the other doesn’t, that can cause resentment,” says Stewart. If a couple has joint accounts and one spouse is more interested in finances and better at managing money than the other, this could help that couple stay on track with their goals.
Joint accounts are easier to track since there’s less paper to sift through. “I have a bias towards consolidating money because it’s simpler and there’s full disclosure,” says Goodman.
“Joint accounts foster transparency, but only if both spouses understand the activity in the account,” says Stewart. “If one person isn’t watching the money and not taking advantage of having a shared account, you can still have distrust later on in the relationship.”
“Have an open discussion about finances,” says Kessler. “If you have problems, get financial counseling. The other problems in the relationship create friction, not money. Whether you keep money separate or together doesn’t eliminate any tension but could make it worse.”