Separate checking accounts, or keep them joint?

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Separate checking accounts, or keep them joint?

Published by sam - 21/10/07 - 04:10:26 pm

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I’ve read a number of articles dealing with the dynamics of personal finance with couples, and one suggestion that pops up pretty regularly is keeping separate checking accounts for discretionary spending, or even for regular monthly bills that are in one person’s name or the other’s. The big motivations for doing this are freedom (”This is my money to spend, save, or invest how I like”), protection (”It’s in my name alone”), and convenience (each person has a checkbook and access to funds at all times). There may be other tax-related advantages that apply to some couples if they have their funds separated, but I don’t often read about these. Most of what I read about talks about the budgetary advantages of maintaining separate accounts, mainly as a means to simplify and define who spends how much.

I don’t buy into this. My wife and I for the large part pool our finances. She has access to most everything I have and do, and I have access to everything she has and does. Separate checking accounts might keep a spendthrift husband from ruining his joint finances with his frugal wife (or vice versa) for a while, but this is a quick fix rather than a long-term solution. Separating finances like this helps to limit spending, but it also erects barriers that can be detrimental to the big financial picture:

It puts up barriers to discussion about ongoing issues. Presumably there was discussion before setting up the separate checking accounts in the first place (and good reasons for doing so at the time) but there’s the tendency to think that this will solve the underlying issues. “Well, you’ve spent all your money for the week/month/quarter.” It’s tempting to just end discussion there, but if the marriage has any substance there will be discussion. But staring at a balance of $0 — or a rising credit card balance that’s yours and yours alone — is impersonal, and shifts the issues away from the marriage and to the bank or the credit card provider, who don’t care about your marriage issues at all. The discussion (battles?) should be between the partners.
It may also put up real access barriers to see where money is being spent. This might be the case if one partner makes way more than the other. If finances are separate, it becomes easier for one partner (particularly the higher-earning partner) to hide spending from the other. Banks and credit card providers and businesses usually have strict policies, many of which are designed to comply with confidentiality statutes, not to discuss financial details with anyone except the account holder. One partner can barricade access to financial information that would expose spending patterns that affect them both.
It costs more. This is probably the least important consideration in my thinking, but having two checking accounts lowers the average balance of either one, which may reduce the amount of interest either one earns. A lower average balance also increases the likelihood of bouncing a check. There are also two sets of checks to maintain, two sets of account fees, etc.

I just don’t see any long-term benefit for couples to cordon off their finances like this. If a man and a woman decide to share their lives in a marriage, then control over their own lives and what they want to as individuals becomes secondary to what they want, and need, to do as a couple. Separate finances encourages people to put blinders on with regard to the other’s finances, and also gives people the ability to hide things from the other. Joint finances, on the other hand, encourages discussion and brings all spending out in the open. It’s far better if both partners know everything about their finances, because then they are in a better position to fix it.

Source: http://www.mightybargainhunter.com/2007/10/11/separate-checking-accounts-or-keep-them-joint/

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October 21, 2007 | Financial Planning |

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