Here’s an opinion that may be controversial:
I think every married couple should have combined finances and shared bank accounts.
Meaning, a single joint checking account which all income flows into and all expenses flow out of.
I think this is a controversial take because it’s becoming less and less common. About 37% of millennials report forgoing a traditional joint bank account after marriage and are opting to keep their finances separate. This is double the number of Gen X and Baby Boomer couples who keep their money separate.
Obviously, this is just an opinion and is definitely not the only way to structure your personal finances. However, I do think the vast majority of couples would benefit greatly from simplifying their banking situation and combining their finances together.
Here are a couple of reasons why.
Simplicity
I don’t think I’ve ever spoken with someone about their financial situation who has said, “Man, I really wish my financial life had more moving parts and more bank accounts to manage.”
Simplicity with your personal finances provides clarity about where you stand and reduces stress.
Money is by far the top cause of stress in America. More than 72% of people reported feeling stressed about money sometime in the last month.
In an American Express survey, more than one-third of couples reported finances to be the most stressful facet of their relationship. This was followed by intimacy at a distant second (11%), children (9%), and in-laws (4%).
Too many credit cards, savings, and checking accounts can muddy the waters and make it difficult to track what’s going on in your financial life. The more your money is spread out among multiple accounts, the more likely you are to not know exactly how much money you have or how much you’re spending—which leads to stress and uncertainty.
Having separate accounts also adds friction to everyday money decisions because you have to coordinate how everything is going to work together.
How do you split up bills and expenses? Does one person pay the mortgage while the other pays for food? How do you determine how much each person should pay for these expenses? How do you split it up so it’s “fair?” Who pays for dates and vacations?
How do you save for joint long-term goals like a house, a car, or college, or retirement?
Don’t even get me started on couples who Venmo each other after certain purchases.
So instead of trying to decide who pays you what, with a joint checking account you both pay for everything — much simpler.
Transparency
Given that a whopping 43% of Americans don’t even know how much money their spouse makes, I think it’s safe to assume that transparency surrounding money is something many couples struggle with.
Additionally, 36% of couples disagree on how much they have in investable assets. About 20% of adults who are married or in a committed relationship report having “secret debt” that they haven’t revealed to their partners. And 5.4% have a “secret checking account.”
Knowing all this, it’s not surprising that 63% of couples believe “their significant other overspends in some way” according to a study by TD Bank. That number jumps to an overwhelming 83% for millennials.
In order to successfully manage money as a couple, you need to be open about your financial wants, goals, and worries. With a joint account, you’re both in on the good and bad details about your financial situation. You can’t hide your purchases because spending can easily be viewed by both spouses. This transparency not only makes things easy to track but also promotes openness and better habits. Having shared finances forces conversations about money which leads to better financial decisions.
A recent study of over 200 couples by the Journal of Consumer Research found that couples who use joint bank accounts are more satisfied with how they and their partner are saving and spending, have less financial conflict, and build better money habits over time.
Now, if you think this discussion on joint bank accounts doesn’t matter much in the grand scheme of your finances, I’d beg to differ.
There are investors who grind 80 hours a week to add a tenth of a percent to their returns when there are two or three full percentage points of lifestyle bloat and mismanagement of family finances that can be exploited with way less effort.
Behavior and temperament matter far more than technical smarts when it comes to building wealth.
I liked this line from the JCR study I mention above:
“It’s possible that joint accounts make couples happier, but it’s also possible that happier couples are more likely to join their finances.”
Typically, the same principles that lead to successfully sharing and managing money as a couple are also the same principles that lead to happy, successful marriages.
Thanks for reading!