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Why having separate bank accounts can matter in a marriage

Apr 17, 2023

April 17, 2023Editor’s Note: This story originally appeared on The Penny Hoarder. If you are married or living with your partner, you share a lot. your home. your weekend plans. Maybe even a child or two. - Advertisem*nt -But just because you’re sharing a life together doesn’t mean you have to share the same bank account. Having separate bank accounts in a marriage or a serious relationship can be the perfect solution for harmonious money management. Having separate bank accounts is not a sign that you are not connected as a couple. In fact, there are many valid reasons why a couple may choose not to merge finances. - Advertisem*nt -6 Reasons Why a Couple May Want Separate Bank Accountspikselstock / Shutterstock.com You want to stop being timid about shopping. You have different income levels. You have different spending habits or money management styles. You are used to financial freedom. You’ve been burned by a former partner. You want to protect assets for your children. 1. You Want to Stop Being Nervous About Shoppingby Yesstock/Shutterstock.comWhen you share bank accounts with your significant other, they’re there every time you swipe your credit card, jump in to shop online or make an ATM withdrawal. - Advertisem*nt -Sometimes you want a little financial privacy — whether you’re trying to surprise your honey with an anniversary gift or you just don’t want them to know how much you spent on a new pair of shoes. The Penny Hoarder conducted a survey on people’s budgeting and spending habits in 2021 and found that nearly 1 in 4 respondents said they’ve kept purchases a secret from their significant other for fear of how they’ll react. Keeping important financial secrets from your spouse – like piling up secret credit card debt – can be harmful to your relationship. However, if you want a little autonomy to spend money (responsibly! ), then having a separate bank account can help. 2. You Have Different Income LevelsLand Prod / shutterstock.comIf you earn significantly more than your partner, you may be disappointed to see them spend your hard earned money on purchases you don’t agree with. If you earn less, you may be bothered by feeling that your partner is micro-managing your spending. You can avoid feelings of resentment or annoyance by coming up with a reasonable way to divide household income and shared expenses—and then each person is given the financial freedom to manage their own money how they see fit. Let’s see3. You Have Different Spending Habits or Money Management Stylesbarnak / shutterstock.comAnother reason you might opt ​​for separate bank accounts is if you and your other half have different spending habits or money management styles. Maybe you prefer to spend money on experiences, while your husband prefers to buy the latest technology. Perhaps your girlfriend finds it easier to use a cash envelope system to stay on budget, while you hate carrying cash and can’t function without checking your budget app every day. Rather than trying to persuade your partner to see things your way—or instead of constantly arguing about your joint account balances—it may be better to maintain your own individual accounts. 4. You’re used to financial freedomNew Africa / shutterstock.comAs couples wait until later in life to marry, having sole control over your bank account can be difficult to adjust to merged finances. “If you’re getting together in your 30s or 40s or later, you’re used to doing things and that’s comfortable for you,” said Isabel Barrow, director of financial planning with Edelman Financial Engines. It may be better to maintain separate bank accounts. There’s also the worry of losing your money management skills if you hand over the reins of paying the bills and handling investments to your spouse. It can be helpful for both of you to stick with each other when it comes to managing your money, rather than having one partner who does it all. 5. You’ve been burned by an exadriaticphoto / shutterstock.comPast experiences can have an emotional impact on our money mindset. Barrow said she often sees couples who are in second marriages choose not to open joint accounts or to merge other assets. “I think a lot of times it’s just to give them peace of mind knowing that they are free to spend and save how they choose,” she said. “They may have had a disagreement in their prior marriage about money or maybe there was something that led to the divorce, and then they feel financially strapped and they don’t want to go down that road again.”If your former partner was financially controlling or irresponsible with money, maintaining your own savings account can give you peace of mind — even if your new spouse or significant other doesn’t display the same behavior. 6. You want to protect assets for your childrenfizcase / shutterstock.comCouples who get together later in life and have children from previous relationships may choose to maintain separate accounts and assets in order to transfer money to their own children. Barrow said that if you want to protect inherited money or gifts, placing those financial assets in a trust is helpful. Assets placed in a trust are more likely to be protected from being divided between spouses in the event of a divorce. 4 Tips for Successfully Managing Money Separatelyprostock-studio / shutterstock.comKeeping finances separate in a relationship requires a little extra work. Here’s what you need to know when moving forward with this financial arrangement. 1. Plan for shared expensesAfricaStudio / shutterstock.comIf you decide to keep your funds separate, you should have a plan for how you will handle shared household expenses. “Every couple needs a system that works for them,” Barrow said. “Once you find it, stick with it.”You may decide to have each partner cover a specific set of bills. For example, your spouse can take care of paying rent and student loans while you cover child care and groceries. Another option is to split the bill for everything. Money transfer apps like Venmo and Cash App make it easy to reimburse each other for shared expenses. However, Barrow found that constantly splitting checks could become tiresome and lead to discord or resentment. What she recommends is for couples to open a joint bank account for shared expenses, while each maintains separate accounts of their own. The amount of money each contributes to the joint account should be based on the percentage of joint household income they earn. For example, if you make $60,000 and your partner makes $40,000, you should cover 60% of shared expenses while they contribute 40%. 2. Keep important accounts in both namesDean Drobot / shutterstock.comEven if you pay the bills separately, it’s important for both people in the relationship to have names on the mortgage or rental agreement — especially if you’re unmarried. “If … you are not married and [the home] is in one person’s name, there is a possibility that if the mortgagee passes away, the unmarried partner could be kicked out of the home,” Barrow said. The same rule applies to utility accounts. You don’t want to break up with your boyfriend and cut off your electricity and water because he was the only one listed on those accounts. However, if you have Netflix in your name and your significant other’s name is on a Spotify account, it’s not as important to make sure those subscriptions are in both people’s names. 3. Separate accounts won’t necessarily protect you if you get separatedfizcase / shutterstock.comJust because you have money held in your name only, your spouse may have rights to those assets in the event of a divorce. For married couples in community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin — all property and debts are considered shared marital property and are usually divided equally in a divorce. regardless of whose name is on the account. Barrow noted that most states are equitable distribution states, meaning that property acquired during the marriage “must be divided fairly, but not equally”. Entering into a prenuptial agreement before you marry means that you and your spouse can mutually agree on how you want their property to be divided instead of being subject to state laws. 4. Take time to plan for the future togetherDragon Images / shutterstock.comWhen you and your spouse manage finances separately, you may not be able to see your overall financial picture as clearly as couples with a joint bank account. That’s why it’s important to have open conversations about money and be on the same page about financial goals. If you are married or in a committed relationship, you should know how much money your partner makes, what debt they have, and their spending habits. Make financial transparency a regular part of your life by implementing a monthly money date or family budget meeting. “Even if you’re setting money aside, you should plan together,” Barrow said. “You need to determine together what your spending limits should be or what your savings goals should be.”