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Coins & Dineros: Separate or Joint

Finances are a big part of any relationship. Whether a professional one or a romantic one, finances are a key factor. Finances have caused many a relationship to end. If money isn’t handled properly, friendships have been broken. I truly believe that every day, somewhere in the world, you have two individuals who have fallen out…and money had a part to play in it. If any relationship is going to sustain it has to have a sturdy foundation, and financial stability is a key ingredient in that foundation.

Keeping all of this in mind; all couples, especially those who are married or getting married…have one of many decisions to make. Do we have separate or joint bank accounts? I do believe that long before a couple walks down the aisle; one of the conversations they need to have had, is deciding how the finances of the household is going to be managed. You have those couples who merge all of their finances together in one account. You have those couples who chooses to have separate bank accounts. Lastly, you have those that have a joint bank account for the bills. This is an account that each individual feeds when they get paid from their place of employment or when they deem it necessary. However, they still have their own bank account. This is where the bulk of their finances go.

When I look at the household I grew up in or when I think of the couples I’ve seen over the years, a strong majority of them have separate bank accounts. There are some couples or individuals where the female may have some level of access to the man’s account, but as it pertains to their personal money…everything is separate. I also said to myself that when I…or if I ever am in a relationship and get married, I would have separate bank accounts. For me, there’s multiple reasons why this is important to me. Trust is one of the reasons, as well as the strong need to protect what’s mine. I 100% agree with having a prenup as well, but that’s a whole separate topic for a different day.

There are advantages and disadvantages to joint accounts, and there are no hard and fast rules about the best type of account. Whatever works best for both of you as a couple should prevail. Some legal affairs are also streamlined with joint bank accounts. In the event that one spouse passes away, the other spouse will retain access to the funds in a joint account without having to refer to a will or go through the legal system to claim the money. Depending on the state and local laws, the surviving spouse may have to go through a lengthy legal process to claim money in a separate account.

You and your partner will each know how much the other earns, how much money you spend and on what, along with all your other financial habits. This needn't bother you, but you may prefer to have some degree of financial privacy - in which case you may want to keep your finances separate or have your own individual bank accounts as well as your joint bank account. What's more, if you have any money left over in the joint account after you've taken care of all your essential costs, you can both decide on the best way of making use of it. You may agree to leave it in the account for any unexpected costs you may face further down the line, transfer it to a high-interest savings account to earn higher returns on your savings, or treat yourselves to an evening out at a posh restaurant or a weekend away, depending on how much spare cash you have. If you decide to go your separate ways, and the joint account is still held in both your names, you'll have to come to an agreement about what to do with it - and you may well decide to shut the account altogether.

Problems may also arise when one spouse enters the marriage with student loans, credit cards, alimony, child support or other dept. that must now be paid with joint funds. This situation can often cause resentment in the other spouse, who becomes responsible for paying the debt as well. To avoid money arguments, couples should discuss their separate debts in detail before deciding on which kind of banking works best for them.

In 2016 TD Bank Survey, 76 percent of couples said they shared at least one bank account. That means a quarter of couples keep their finances separate. Surprisingly, millennials were the least likely to be in favor of sharing bank accounts, compared to older generations.

When deciding to have joint or separate bank accounts, there are some important questions that would be highly beneficial for the two of you to discuss:

  • What’s the approach if we pay off the debt we accumulated together or separately?

  • What’s the approach if we make investments?

  • How do we manage everyday spending on household purchases?

  • How will regular household expenses, such as the mortgage or utility bills be divided?

  • How do we handle emergencies?

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