Merging Finances: Should We Keep it Separate or Create Joint Accounts?

Mar 24, 2024 | Finances, Protecting Assets

It’s said that choosing who to marry is one of the most important financial decisions you will ever make. It is the one decision that will influence all others and impact every other aspect of your life, for better or for worse. So, should lovebirds merge their finances along with their lives? Let’s delve into this dilemma, exploring the benefits and complexities of merging or keeping finances separate in marriage.


The benefits of a joint account

The aspect of shared finances that I support the most is that it necessitates even greater communication around finances, which I’m all for! You’ve got to be comfortable getting financially raw with one another. However, this tends to be an area that too many couples seem to have trouble with.

Watching couples navigate the financial maze on shows like Love is Blind reminds me of the importance of aligning financial goals early on. Sure, differences in spending habits or saving goals can crop up, but it’s the lack of communication that’s the real deal-breaker.

I was one of those people who binge-watched the latest Love Is Blind season (Season 6), and it struck me watching Johnny and Amy, who’d spent countless hours talking about their lives and their futures, gotten engaged, and even been on their honeymoon. Then, just days out from their wedding, in passing, began discussing their finances, their goals, and their approach to spending vs saving. These two were very different, with Johnny wanting to retire early, wanting to save as much as he could and live well below his means, while Amy adopted more of a carpe diem kind of attitude. 

While we haven’t seen this polarity be a source of issue for these two just yet, whether in reality or as a result of nifty editing, having worked with women from all around the world, I know too well that it’s only a matter of time. Having different goals or spending habits is not the issue in itself; the lack of communication or understanding around it is.

Joint accounts also foster a deeper sense of trust. Being transparent about money means being transparent about life itself. What you’re spending your money on is a reflection of your interests, priorities, desires, and habits – good, bad, or otherwise. It’s like having an open book – no secrets, just a shared journey towards common goals.

Studies, such as those by Northwestern Kellogg School professor Eli Finkel, suggest that joint accounts can bolster relationship satisfaction by fostering communication and alignment on financial priorities. In a world where financial stress is a leading cause of marital discord, joint accounts offer a lifeline of trust and transparency.

It’s also interesting to know that joint bank accounts are the favored choice in Western nations, with the slight majority, 52-65% of heterosexual couples, using only joint bank accounts. On the flip side, 10-15% of couples keep things completely separate, while the remainder opt for a hybrid approach, the latter of which we’ll explore below. 

In his research, Finkel says, “Understanding how bank-account structure affects marriages has been one of the major understudied topics. The newlywed years are considered the ‘connubial crucible.’ That means the dynamics that couples develop in those years predict how their relationship will progress thereafter. We wanted to take that crucial period and see if we could use bank account structure to alter how satisfied couples are in their relationships. And we found that we could.”

As we highlighted above, the research found that joint accounts help newlyweds align on their financial priorities and avoid acting in a transactional way.

While it provides an interesting insight, the research is not conclusive. “We also need to consider situations where people are starting off more precarious in their relationship or finances,” he says. “Would a joint account have the same effect? Would it be worth the risk for couples to go all in?” 


The Disadvantages of a Joint Account

Even though the research highlights that merging finances can improve a newlywed’s relationship, it isn’t all sunshine and rainbows. It can also shine a spotlight on differing spending habits and priorities, stirring up occasional conflicts. Instead of throwing in the towel, I suggest seeing it as an opportunity to dive deeper into understanding each other’s money mindsets and find common ground.

The other challenge joint accounts can present is a change in personal autonomy over your finances and how you spend your money. If you’ve lived your life hyper-independent, then the idea of giving up that level of control may feel a bit uneasy at first. My view on this returns to the root of the commitment you’re preparing for. If you’re ready to say “I do” and make that life commitment to another person a legal contract, then it’s time to look at why doing so with your finances is bringing up resistance.

Another issue merging finances can bring, although hopefully avoidable,  is untangling finances in the case that ‘happily ever after’ doesn’t work out. That’s where having a prenup in place will serve as a blessing. Since you’re here reading this, I’m sure a prenup is either already on your radar or something you’ve planned to get in place.

Now you know the pros and cons of fully merging finances, let’s take a look at what it means if you choose to keep things separate. 


Benefits of Separate Accounts

Before tying the knot, you may both have existing financial obligations, such as student loans, credit card debt, or personal investments. Keeping separate accounts could make it easier to manage these premarital financial responsibilities without entangling them with your joint finances. This separation could streamline your future financial planning and prevent any potential conflicts arising over pre-existing debts or assets.

For example, Sarah may have significant student loan debt she is actively paying off, while John has been saving for years to invest in his business venture. Keeping their finances separate allows each of them to focus on their individual financial goals without the added complexity of joint finances.

Separate accounts also help to establish clear boundaries regarding financial responsibilities within your marriage. Each of you get to maintain control over your income and expenses, removing the need for constant negotiation or approval for personal purchases. This independence can promote a greater sense of independence and self-reliance, which will work better for some couples. 

Consider a scenario where one partner receives a significant bonus at work. With separate accounts, they have the freedom to decide how to allocate this bonus without consulting their spouse. This independence could foster greater trust and respect for one another’s financial decisions, without the need for full transparency.

The other advantage is that managing finances becomes more straightforward when each of you are solely responsible for your own cash flow. You get to track your income, expenses, savings and investments without interference from your spouse. 

For instance, John may prefer to allocate a portion of his income towards his gaming hobby, while Sarah prioritizes saving for future girls’ trips. With separate accounts, they can each manage their own spending habits and budgets, without the need for discussion or compromise.

Additionally, as we’ve mentioned, studies such as that by the Kellogg School, indicate a growing trend towards maintaining separate finances among married couples, with 10-15% of couples preferring to keep things completely separate.

Overall, while merging finances with a joint account may work well for some newlyweds, maintaining separate accounts has its benefits too which may be better suited for you and your spouse, and shouldn’t be overlooked either.


Disadvantages of Separate Accounts 

That said, as joint accounts bring with them the need for open communication and transparency, complete separation could open the door for greater secrecy. These can lead to situations where one part of the couple is greeted with a financial surprise, for example, that their partner has terrible spending habits, credit score,  is in debt or is simply not as financially solid as they present themselves to be.

Moreover, separate finances can complicate family budgeting, leading to the dreaded “keeping score” game. Who paid for dinner last time? Whose turn is it to foot the bill? It’s a recipe for resentment and misunderstandings in my book.

I’ve encountered friends who chose to keep their finances entirely separate, and unfortunately, it often led to challenges. Money discussions can indeed be uncomfortable, but avoiding them doesn’t resolve underlying issues; it just postpones them until they become unavoidable.

Consider a couple I know who maintained separate accounts due to differing spending habits. Despite each being financially savvy, their conflicting views on spending led to a lot of tension, especially around their desire to have children. Eventually, with the pressure of time building, they parted ways, realising they couldn’t reconcile their differences.

While giving up financial independence will vary for each person, feeling anxious about merging finances could indicate underlying concerns worth exploring. Money tends to amplify existing emotions, and if your partner has financial difficulties or exhibits controlling behaviour, it’s crucial to address these issues before merging finances, and lives!

In the end, whether to merge finances or keep them separate as newlyweds depends on your individual circumstances and comfort levels. However, it’s essential to address any underlying issues and ensure financial compatibility to build a healthy, mutually beneficial partnership.


To merge, or not to merge?

So what is the right decision for you? Personally, keeping separate accounts and paying for things like the rent or mortgage on your own, gives me more flatmate vibes. For that reason, and those listed above, I’m not a fan. Ultimately, if I’m ready to merge my life with my chosen person, but not my finances, that is telling me something major that I need to look at. What is the underlying reason and is this red flag also existent in my relationship, but I’m just avoiding to admit it?

However, the all or nothing approach may not suit every couple. Instead, you may opt to use a merged, or hybrid approach, to managing your finances.

I polled my community on IG @witchof_wallstreet,  to ask them this question: In marriage, would you or do you, choose a joint account, separate account, or a hybrid account? 9% voted for separate, 9% for joint, and the remaining for the hybrid approach.

The Hybrid Approach to Finances

Let’s talk about the hybrid approach to finances. How does this work in practice? 

  1. Setting up a joint account for shared expenses: Couples often opt to open joint accounts for shared expenses such as housing costs (mortgage or rent), utilities, groceries, and joint entertainment expenses. You both contribute a predetermined amount to this account based on your income levels and financial capabilities. In doing so, it still promotes transparency and a shared responsibility for essential expenses without fully merging all finances.
  2. You each maintain individual accounts for personal expenses: These expenses include things like discretionary spending and individual savings and investing goals. This allows for autonomy and independence in managing personal finances, including discretionary spending on hobbies, personal care, or gifts, and avoids ever being in a situation where you’re asking for permission from your spouse or feel like your spending is being monitored.
  3. Setting up regular money dates and financial check-ins: I really advocate for money dates (i.e., dedicated time with your partner or spouse to review your joint and individual financial statuses). During these dates, you can discuss any changes in income, expenses, or financial goals and adjust your budget and contributions accordingly. This ensures you both remain informed and involved in all aspects of the financial decision-making.
  4. Setting financial goals together: Even though you will be maintaining some financial autonomy, I still recommend establishing shared financial goals, such as saving for a house, planning for retirement, or building a joint emergency fund. You can both contribute to these goals, either through joint accounts or through your individual contributions, depending on your preferences and financial situation.
  5. Keep talking, even when it’s hard to do: Open communication around money is essential, especially as you’re merging your lives together. I encourage you to use these money dates to openly discuss your financial priorities, concerns, and long-term goals too. This includes being honest about your spending habits, debt obligations, and goals. It’s a really powerful way to build greater trust and understanding within your relationship, and from my experience, leads to a stronger bond too.

Overall, a hybrid approach to managing your finances as newlyweds offers a balance between shared responsibility and individual autonomy. It still promotes transparency but also allows for flexibility and independence, which I much prefer.


The Bottom Line

Whatever approach you decide upon, the key pillar of success will be ensuring open communication and transparency with your partner. 

Let’s put financial conversations, expectations, and division of payments all front and center and begin to normalize having these conversations from the start. Perhaps you might use reading this article as the springboard to bring up that necessary conversation with your partner today.

You are writing your life story. Get on the same page with a prenup. For love that lasts a lifetime, preparation is key. Safeguard your shared tomorrows, starting today.
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