The “Joint or Separate Accounts?” Debate is Bunk
Photo courtesy of Jamie McCaffrey
Joint or separate bank accounts? That is the question.
Or is it?
It’s certainly an emotionally charged question, especially for younger couples just starting out. And it’s one that gets a lot of attention. If you listen to a lot of the media, it would be pretty easy to feel like your decision around joint vs. separate accounts is really a question of whether you’re in this relationship together or not.
Which is a pretty heavy question.
And a ridiculous one. To be honest, it’s a lot of BS.
The only thing that HAS to be joint
There are many couples who’ve had success joining their finances.
There are many other couples who’ve had success keeping things separate.
But there’s one thing that every happy couple has in common.
Joint goals.
That’s the only thing that truly matters. Whose name is on the bank account that pays the life insurance premium? Who cares? That only matters if you let it.
But you don’t really have a choice when it comes to setting goals. A happy family depends on those being done together.
Now, that doesn’t mean that you always have to agree on everything. Sometimes the process to get to those joint goals is a little messy. You’ll disagree, argue, and maybe even hurt some feelings along the way.
But eventually you’ll have to compromise and move forward with a common vision (check here to get some help doing that). That’s really the only way to give your family a secure and free financial future.
But whether you do that with joint or separate bank accounts is largely irrelevant.
Don’t get sucked into the hype
The financial news has one job to do: attract an audience.
And what’s the primary strategy for doing that? Voicing strong opinions on “controversial” topics.
They don’t have to be important topics. They don’t even have to be informed opinions. All they have to do is stir an emotional reaction from their audience.
The joint vs. separate account debate is a prime example of this. At it’s core, it’s really just a question of logistics. But the media knows that they can draw an audience by playing up the emotional aspects of the decision, so they frame it as a referendum on your relationship. And as a young couple figuring out a lot of the financial stuff together for the first time, it’s easy to get sucked into that line of thinking.
But you can know better.
You can recognize that having joint bank accounts doesn’t mean you have joint goals.
You can also recognize that having separate bank accounts doesn’t mean you’re working against each other.
You can choose not to confuse the tactic (joint or separate accounts) with the desired outcome (your common goals).
You can be smart enough to recognize what’s truly important and not get stressed about the rest.
Focus on the goals
At some point you actually do have to make some decisions about whether to keep your accounts joint, separate, or some combination of the two. And in Thursday’s post I’ll talk about some of the different ways you can do that.
But those decisions are essentially just logistics. They’re tactics. And they can be helpful. But they’re not the focus.
The focus is your goals. If you can get on the same page there, then the rest of it is just a question of how you can best work towards them.
There’s no morality in it. No referendum on your relationship. Just a question of logistics.
I think it’s easier to have/justify separate goals when you have separate accounts – so that’s why I think the two issues are correlated.
I agree that they’re correlated. I just don’t think they have to be linked for every couple, and I think that when people focus on the joint account part of the discussion they’re missing the point. It’s like focusing on whether or not you buy yourself a coffee every morning instead of the actual goal of putting money into a savings account. Sure, the specific tactic CAN help with the end goal, but not everyone has to use the same tactics.
Separate accounts seem to work well for some people and not so well for others. My brother and his wife, for instance. They’ve had separate accounts their entire marriage and bickered about money the entire time. She just filed for divorce. I think you’re right that the problem is mainly that they didn’t have joint goals. However, I think the fact that they had separate finances to start with was problematic. When your money is in two separate buckets, it’s easy to put your personal goals ahead of your family goals which is exactly what happened in their case.
“Separate accounts seem to work well for some people and not so well for others.” I agree, and that’s exactly the point. Some people will work better with joint accounts. Some won’t. Whichever way helps you best work towards your joint goals is best.
I am definitely in the camp of joint accounts, but it is because I view it as joint goals. I think it is the best “representation” that you are jointly working together toward the family goals. But it really all comes down to communication. What I don’t like to see as a planner are couples who have no idea what is going on with the other’s finances. If you can’t fully disclose yourself to your spouse, then there is a big underlying issue.
“But it really all comes down to communication.” I think that’s a really great point. No matter how you do it, the communication is so key. Being on the same page is how you really work productively towards those joint goals.
I’m a believer in joint accounts, but at the end of the day if you don’t have the same goals then it doesn’t matter one lick what names are on the account. You have to go with what works for you and your spouse and if that means separate accounts then so be it. In my opinion, that’s the beauty of personal finance…it’s personal and you need to do what works best for you.
Right on.
There is no morality to this issue, true. And I agree it’s not worth the emotion we attach to it.
I want my marriage to have complete and open transparency. A joint account provides that more than separate ones. To me, combining everything is simply one step closer to complete and total oneness in marriage, which should be the goal.
Good for you guys for finding an approach that works for you both financially and ideologically. That’s really the best of both worlds!
But Matt, where’s the fun in that? 🙂
j/k. You’re right. I’ll assume that for most couples if you’re married and intend to stay that way, then your goals should be the focus, not the logistics of which account the money comes from.
Haha, yeah the true answer is usually less fun than a strong opinion. Oh well.
I like that you are making a distinction between the tactic and the true objective. My objective goes beyond having joint goals (though that a main component), which leads to joint accounts as the only viable tactic. 🙂
Thanks Emily. We like the joint route too for multiple reasons, but I know plenty of people who do things just fine with separate accounts.
That’s a great re-focus, Matt. Joint goals are infinitely more important than the kind of buckets our money is in. Still, might there be a bit more to the accounts than just whose name is on them? For example, isn’t there a true division to “my money” and “her money” when we have separate accounts. I mean, from a legal standpoint, it can’t be “our” money if its in my wife’s separate account.
Yes, you’re definitely right that there’s a difference from a legal standpoint and that can end up mattering, especially if you get divorced. But in terms of trying to foster a positive relationship where you’re both rowing in the same direction, the legal differences don’t really matter.
Great point…having the same goals is ultimately the most important thing when it comes to handling the family’s finances. But I think Mrs. PoP and DB40 make great points. Even though my wife and I were more or less on the same page when it came to the finances, it didn’t feel like we were actually a team until we combined accounts.
Like you, my wife and I feel more on the same page with joint accounts. But the reality is that it can be difficult and stressful for some people, and when they’re told that they HAVE to join accounts it can be distracting from what’s really important. In the end, each couple has to make the effort to figure out the system that works for them. Sounds like you guys have done that.
I agree, Matt – we make the joint or separate accounts the big story – but the most important story is having joint goals. I’ve seen couples with joint and separate accounts work extremely well and also fail miserably. And more often than not – it wasn’t because of where they had their money but due to a lack of communication, lack of money transparency and a lack of shared common goals.
I love that Shannon! Couldn’t agree more with your last sentence there.
Smart post, Matt, and I totally agree. My mom and stepdad have had separate bank accounts for years, and it’s worked super well for them, because of the fact that they have joint goals. Both of them having been divorced before, they just didn’t want to “go there” with the joint money. Plus, he’s a major league tightwad, and my mom didn’t want to be told how to spend or not spend her money. 🙂
I’ve heard that a lot actually with married couples who’ve been divorced before and I think it’s really interesting. It’s hard to tell how much of it is a “been burned before” type thing and how much of it is just a matter of being more comfortable with the idea of a relationship where each person preserves some individuality. In any case, that’s a great example of people who can do the separate thing right.
I couldn’t agree more. It’s a lot easier when your both pulling in the same direction
One thing I don’t think you really touched on was having a joint financial picture. My husband and I have one joint account and many accounts in one or the other of our names, but I still talk about the day we “joined” our finances. That was the day when we sat down and listed each of our credit accounts, student loan accounts, long term savings and retirement accounts. I needed to go from thinking about “my” financial picture to “our” financial picture. I think making sure you have a complete and honest picture of both people’s accounts (at least the accounts that would be doing work toward or hindering joint goals) is a huge and necessary part of the path toward joint goals. You can definitely do it with separate accounts, but I think some people with separate accounts forget to have that discussion.
I think you’re spot on here and you’re right, I probably should have emphasized this point a little more. Whether you’re accounts are joint or separate, the real keys are joint goals and a healthy dose of trust and communication. But those last two are really integral to the process and should be emphasized just as much. Thanks for pointing it out!