Opinion: Married Couples Should Have Separate Bank Accounts. Here's Why
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When Lindsey Lathrop-Ryan tied the knot, she and her husband Colin decided to keep their bank accounts separate. In their five years of marriage, this strategy has worked out well for the couple.
They agree on what they need to save and invest based on retirement goals and discuss large purchases. However, anything beyond that is discretionary. Both Lindsey and Colin value having control over their own money and believe it keeps them from feeling resentful toward one another.
These days, there are many couples like the Ryans who have made the choice to separate their finances and prefer it to having joint accounts.
A Quick Look at the Basics
If you have a joint account, you and your partner have equal access to it. You can both deposit or withdraw money without asking for permission from one another.
A separate or individual account, on the other hand, is only accessible to one person. You won’t be able to check or make changes to your partner’s account and vice versa. Both of you have complete freedom to do whatever you wish.
The Benefits of Having Separate Bank Accounts
In the past, it was rare for married couples to have separate bank accounts. But recently, separate accounts have become more common.
A survey by Bank of America found that 28% of millennial couples are forgoing joint bank accounts and keeping their finances completely separate. It may buck the traditional trend of merging everything together, but nowadays there are several benefits that outweigh the perceived stigma of flying solo.
1. Opportunities to learn from one another
Alexandra Davis and her husband, Ryan, are both data-driven engineers. They feel that having separate bank accounts gives them new opportunities to evaluate their spending and investments.
“We meet often to discuss where our money is going and how well we’re meeting our financial goals,” she said. Alexandra explains that her financial situation may be less clear if she and her husband decided to lump everything together.
Several of the Davises’ personal accounts are from different banks, which they opened in their younger years. They like being able to compare interest rates and long-term dividend earnings from these accounts and make changes to their personal finances as necessary.
The couple believes that having separate accounts allows them to learn from one another and make the best financial decisions that will benefit both of them in the long run.
2. Greater freedom
When you share an account with your spouse, you may be afraid to buy the things you want or need. This is particularly true if you and your partner have different spending habits. With separate accounts, you can enjoy more freedom to spend as you please.
Danielle LaFee and her husband like having separate bank accounts because it gives them freedom and autonomy over their money. Once they both cover their expenses, they can spend without worrying about the other person’s opinions or having to ask permission for small purchases.
LaFee explained that if she and her husband have different “fun” items they want to buy, they never restrict or limit the other person’s choices. If their budget is tight, they discuss how they can adjust their expenses to make room for each of their wants and needs.
3. Equal contributions toward monthly expenses
Separate accounts can allow each spouse to make equal financial contributions so that nobody feels taken advantage of.
This doesn’t necessarily mean that every expense has to be split down the middle.
LaFee explains that she and her husband embrace a team mentality and make decisions that are best for both of them. They don’t place too much emphasis on splitting expenses down the middle or pro-rating their bills based on their varying incomes.
Instead, they discuss which bills and expenses they have throughout the month and figure out how they want to split them.
Sometimes, she or her husband will cover the expenses for a month or two while the other pays off debt or takes care of a large one-time purchase.
4. Less debt-related tension
If you got married later in life, chances are you or your partner have some sort of debt. Whether it’s student loans, credit cards, or any other type of debt, it can bring tension to your marriage. You may be hesitant to use your money to pay off the debt your spouse accumulated before you tied the knot and vice versa.
“By keeping your bank accounts separate while one partner focuses on repaying their debt, you can reduce the risk of conflict and resentment,” said Meredith Silversmith, a licensed marriage and family therapist.
Instead of the loan payment coming out of one joint account, you and your partner would each be responsible for paying for your own debt from an individual account. Silversmith believes that this can create clear boundaries around each of your financial responsibilities.
5. Builds trust
People often assume that when a couple decides to have separate bank accounts, they do so because they don’t trust one another. Separate bank accounts can actually build trust between spouses.
Davis said just because she and her husband have separate accounts doesn’t mean they’re any less devoted to their marriage than a couple with a joint account. She believes that it’s taught them to communicate and trust each other more.
“We keep close tabs on all of our accounts, have agreed upon limits of personal spending without the other’s knowledge, as well as goals that we are both expected to meet in terms of our investments, retirement, and emergency saving goals,” said Davis.
How to Manage Having Separate Bank Accounts
If you believe separate bank accounts may be a good option for you and your spouse, here are some tips you can use to ensure this strategy works well for your marriage.
Contribute an equal amount to shared expenses
Make sure you and your spouse contribute a proportional amount to your shared living expenses. So if you earn 50% more than your partner, you would contribute 50% more to expenses including mortgage, utilities, daycare costs, and more.
This strategy can establish a true partnership because you and your partner will chip in the same, proportional amount of money for your expenses.
You can use an app like Splitwise or Venmo to send or receive payments from your spouse. Splitwise lets you divide expenses by percentage, which can be useful if you’re dividing things based on your income.
What works for your friend and their spouse may not be the right option for you. The key is to find a strategy that feels far and equal to both parties.
Have frequent conversations
Set up a time every month to speak to your spouse about where you both stand financially. Also, discuss how you’re going to administer and share finances. Certified divorce coach Karen Bigman suggests you answer these questions:
- Will your spouse be able to see how much money you have in your account and vice versa?
- How much of your income will you put toward marital expenses?
- Who’s responsible for which bills?
- What if one spouse loses their income?
Establish a joint budget
You may get frustrated or upset if you find out your spouse spent money on something you don’t agree with or believe is too expensive, even if you have separate bank accounts. This can lead to unnecessary fights and tension in your marriage. To eliminate this issue, Silversmith recommends developing a joint budget.
The joint budget will state how much money both of you will allocate toward living expenses, vacations, home renovations, and savings. It will also include a set amount of “spending money” or “no-strings-attached” money for you and your spouse to use however you’d like.
“This arrangement allows the couple to work together towards their financial goals, manage household expenses as a team, and feel a sense of freedom in spending,” she said.
Explore filing taxes jointly
Even if you and your spouse have separate bank accounts, you can still file taxes jointly. By doing so, you’ll qualify for the best tax deductions and credits for your family. If you’re unsure of whether you should file jointly or individually, reach out to a CPA or tax professional. They can run the numbers and steer you in the right direction.
LaFee and her husband have found that filing jointly saves them the most money on their taxes. Each year, the couple gathers their tax documents and submits their taxes together. Historically, they’ve received a small tax return each year. They either split the money evenly, use it to pay for a large joint expense, or purchase a fun item or trip they can both enjoy.
The Davises also file jointly because their tax accountant informed them that doing so would save them over a thousand dollars. Any time their incomes change, they do the math again to make sure that filing jointly is still the way to go.
Consider child-related expenses
If you and your spouse have separate accounts and have, or plan to have kids, it’s important to think about how you’ll handle child-related expenses.
The LaFees have a baby and toddler. They alternate paying for daycare, diapers, doctor visits, and other expenses for their kids.
The Ryans talked about what they would do if they have kids in the future.
They agreed that they would either contribute equally to a joint account specifically for kid-related expenses or keep things separate and pay each other at the end of the month like they do for shared expenses.
Related: How to Make a Budget in 7 Easy Steps
Why Separate Accounts May Not Work
Sometimes, separate bank accounts work great for couples. There are some cases, however, where separate accounts aren’t a good idea. One such situation is when there’s a lack of financial transparency in your relationship. If one or both of you feel the need to hide purchases from the other person, separate bank accounts may only increase your financial suspicions and may lead to financial infidelity.
If you and your spouse decide to keep separate bank accounts because you’re unable or unwilling to communicate openly about money, this arrangement can harm your marriage. It will not resolve underlying issues such as lack of trust around money management and resentment over spending habits.
Also, if you and your partner don’t have shared financial goals, separate finances can be a recipe for disaster. Silversmith states that sometimes, couples opt to have separate bank accounts because they can’t agree on budgeting, spending habits, and long-term savings goals. Unfortunately, this is more of a bandaid than a resolution to the problem.
Make sure you and your spouse are on the same page financially if and when you decide to separate your accounts. If you don’t, feelings of resentment and frustration may arise.