I was once told the secret to a long and healthy marriage is "separate banking and separate bathrooms." The latter piece of advice I took to heart, coming from a couple going on 32 years together. But the separate bank accounts thing I wasn't too sure about.
If you and your partner are beginning to discuss savings, investments and spending, or how to pay off any lingering debt, the question of whether or not to combine your finances will inevitably arise.
But before you make the move, consider your options and weigh the pros and cons of the following scenarios to reach a conclusion that works for both of you.
Sharing it all
Pooling your money into a joint account means you'll likely be having regular conversations about money, which is key if you're trying to stay on track to reach your goals. Besides helping you reach savings and debt-repayment goals in less time, sharing accounts also adds a layer of accountability. If you know you're going to have to explain a big purchase to your partner, you might think twice before buying in the first place.
It's important to figure out who is responsible for what early on. If one of you ends up bearing the brunt of money management duties, it could potentially lead to resentment as well as threaten to leave the other person in the dark.
You'll also want to ask the following questions: Are we both on the same page when it comes to how we save and spend? Am I fine with the fact that my spouse has more personal expenses than I do? Am I comfortable using funds from a joint account to cover them? And am I OK with my partner having access to information on the purchases I make on a daily basis?
Keeping it separate
This system gives you complete independence and sole responsibility for your own finances. However, if one of you tends to overspend, maintaining separate accounts won't do much to curb bad habits since no one's holding you accountable. Plus, keeping your cash in separate accounts can make paying your shared expenses more of a hassle. Not only do you have to figure out who's in charge of making sure the bills get paid, and who's responsible for what portion, but you have to decide how much each of you should contribute for other expenses.
There's also the question of how you're going to save for future goals. It's a lot easier when you have a joint savings account and each contribute a set amount, or percentage, every month. This system can get tiresome, especially on a vacation, to have to add up every single expense you take care of - from meals out to museum tickets to hotel room charges - and then ask your spouse to pay you back for half. But if you don't keep track, or agree on how much you're each contributing, one person can be left feeling a bit shortchanged.
If you're considering keeping it separate, be sure to ask yourselves: do we plan to open a joint account in the future? Why, or why not? And how will we divide joint expenses?
Splitting and sharing
While we need our own accounts and cards to build credit, to maintain independence and to maintain a certain level of privacy, there's something to be said for combining forces to build a savings account or pay down debt. The split and share set-up allows each of you to contribute to your common goals and expenses while maintaining some privacy and control over what you do with the money you earn. The combined approach also exposes each of you to the other's money-management style, which is helpful in understanding the other's approach before you combine everything.
If there's a big difference in your take-home salaries, you'll need to discuss how much you're each comfortable contributing to the joint account. One option to consider is having each of you contribute the same percentage of your income to the joint account. That way, there'll be a sense of equality, no matter how much each of you is earning at the time. Before opening these accounts, consider the following: should the person with the higher income contribute more? If so, how much more? Which expenses will come out of the joint chequing account? And how much will be going toward shared goals and savings accounts?
I've seen a range of scenarios, and I'm always curious about how couples manage their money. The bottom line is, if you're not in financial sync with your partner, your relationship won't be either. Starting the discussion and coming up with a system that works for both of you is the first step and you can always tweak as you go.