Joint vs. Separate Bank Accounts: The Right Mix for Financial Harmony

It's a classic couple's money predicament -- finding the perfect account-management setup that maintains happily-ever-after financial harmony in your household. Hit upon the right formula -- joint accounts, separate accounts, or a mix of both -- and you lovebirds get to brag about your perfect blend of togetherness and independence... and suffer through only the occasional playful reprimand and eye rolling when your beloved makes a minor money infraction.

The happiest couples do this with their moneySorry, but there's no one-size-fits-all solution. Your mileage may vary -- and relationship and finances may suffer -- by blindly following generic formulas, or simply copying what your happily coupled friends and families do.

But the good news is that there's only a limited number of options as far as managing accounts used for regular day-to-day/month-to-month savings and expenses. Here's a quick rundown of the pros and cons of each.

1. Complete merger with joint checking and savings accountsThe pros of a total money merger are that the setup fosters regular financial conversations -- or at least it should -- and makes joint expenses easy to handle because there is less administrative hassle involved. Plus, there's also that feeling of "we're totally in this together" when you're on the same page about saving or paying off debts.

The cons are that it puts a lot of cooks in the kitchen, and things can get complicated if one person isn't as meticulous about tracking bills and other expenses. It can also place the burden of household money management on one partner over another.

That may not be a deal breaker if the person actually likes doing the work. To avoid making one partner feel resentful of the extra work, come up with a trade-off chore -- e.g. dishes or dog walking. Another downside is that, because everyone's business is out in the open, there's less privacy in regards to spending -- either on gifts for your significant other or yourself.

2. A combination of joint and separate accountsThe mix-and-match approach can alleviate some of the stress of managing distinctly separate expenses -- e.g. alimony or child support from a previous marriage -- or if one person dragged outstanding debts -- e.g. credit cards, student loans -- into the marriage, and wants to pay those down on his or her own. The system also exposes each of you to another money management point of view -- a "learning" opportunity, if you will.

On the flip side, maintaining multiple accounts requires more up-front work, because you have to figure out which expenses come out of the joint account, and which ones don't. Plus, the formula can bring up resentment or feelings of inequality, especially if one person makes a lot more than the other and is left with less of a paycheck in his or her own separate account. One workaround is for each of you to contribute the same percentage of your income -- or proportion of it -- to the account out of which joint expenses are paid.

3. Completely separate checking and savingsYou want autonomy? You got it. This gives you the most personal control of any account-management setup: What's yours is yours to manage as you see fit, and the same for your partner. It certainly makes it easier to manage ongoing financial obligations such as child support, alimony, college expenses for kids from a previous relationship, and eldercare for aging parents.

Of course, there's an added hassle of paying for your shared expenses. Deciding on what to pay for fixed bills -- rent, mortgage, the cable bill -- is easy. Variable expenses -- e.g. car transmission repair, or irregular savings goals for vacations, family gifts -- will require discussion, or a system. Also, when you're a unit with two completely separate operating budgets, if you decide to come together at some future point, the merging of money/accounts can get complicated.

Common joint/separate account custody arrangementsWhile every relationship is as unique and special as a snowflake, it's pretty common practice for couples to maintain at least some separation of their money. According to a March 2014 TD Bank survey of 1,000 couples who were either married or living together, 42% of those who pool their pennies in joint bank accounts also choose to maintain separate individual bank accounts, with the main allure being convenience, and the ability to fund secret spending -- which is not as nefarious as I just made that sound.

The top four reasons for maintaining a separate account in addition to those for pooled pennies were: 1) the desire to maintain some financial independence (cited by 38% of individuals in relationships who maintain separate accounts), 2) a place to park funds for emergencies and personal spending (20%), 3) a more convenient way to budget and pay bills (cited as a reason for separateness by 16% of the total respondents), and 4) privacy (noted by 7% of those surveyed).

TD found that the way couples use their joint and separate accounts follows some generational patterns:

  • Millennials (people between 18 and 34): Whether it's starry-eyed love or the fact that their futures hold such possibilities, Millennials are most likely to use a joint account to accrue joint savings.
  • 55-plussers: 62% of the matured marrieds/co-habitators reported using joint bank accounts to keep money for tax payments.
  • Gen-Xers (those aged 35 to 54): Mid-life couples fall squarely in the middle of their younger and older peers in terms of using joint accounts for savings, tax payments, or car payments. Like Millennials, they cited independence as the top reason for maintaining individual accounts. However Gen-Xers are more apt to use a separate account to stash money for personal spending and emergencies.

Here again, what works for others might not be right for your relationship. But knowing how others manage the complexity of couple finances may give you some ideas on a few setups to test drive.

Three questions to considerWe're all adults here. As such, we all have our own financial baggage from our single days. Add another person to the mix, and things can get complicated, especially for couples who get together later in life, and bring to the union already established financial lives.

But if you set up a system that addresses the anomalies, managing money with your honey can run smoothly. Here are some things to consider:

Do you have financial obligations related to a former spouse? Setting up a separate account for expenses like alimony and child support tends to make accounting for such payments easier, even if your partner contributes money to help cover these costs.

Is there "other money" in the equation? If you find a rare 1913 Liberty Head nickel while rifling through the couch cushions, play fair and split the proceeds. However, it's more complicated with things like inheritances and other family related assets -- e.g. collectibles, trusts, family businesses. Holding those in a separate account simplifies the administrative elements, but tensions can still arise when it comes to decisions about deploying the money. Here's where setting up a decision-making framework can help you navigate.

Are there past debts to deal with? During your single days, you and your beloved both probably encountered some financing decisions, whether related to college, cars, or stuff that you put on plastic. Even if the expenses aren't shared, the debt can affect your financing power as a couple. Discuss how you want to tackle them, as well as future debts you accrue as a twosome.

Even if your financial lives are simple right now, life goes on. With things like new jobs, a growing family, an emptying nest, and roof leaks, you'll have to revisit the joint-vs.-separate account issue.

Remember, this is not a pass-fail task: If one option doesn't work, just try a different one.

The article Joint vs. Separate Bank Accounts: The Right Mix for Financial Harmony originally appeared on

Dayana Yochim is the author of The Motley Fool's Guide to Couples & Cash. Try any of our newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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