Managing your money with a spouse.
Joining your now-spouse in matrimony strengthens your relationship and confirms a lifetime commitment. It also comes with a fair amount of effort, not just in terms of making sure that your partnership will stand the test of time, but in terms of adapting your lifestyle to the legal changes in your relationship status.
Along with those changes comes the possibility of combining your finances in a joint bank account. While this has long been the traditional and perhaps expected approach for married couples, you might be less inclined to pool your money right away, or at all, particularly if you prefer to keep some parts of your life separate. What’s the best approach for you and your partner? The answer may depend on the following.
The case for separate accounts
A sense of independence is one of the foremost benefits of maintaining separate accounts. Having the ability to make small splurges or impulse purchases without being immediately held to account not only helps keep you and your spouse satisfied as individuals, but it can also help minimize or eliminate potential disagreements over spending habits.
Having your own money can also provide a release valve when partners do not completely agree on a particular expense. Since it is unrealistic to expect two people to agree on every financial choice, separate accounts can help prevent pressure from building over individual purchases.
Independence and autonomy may be particularly important if you or your spouse are remarrying, or if you are marrying later in life and are already comfortable with your methods of financial management. Separate accounts can also prevent one partner from becoming overly reliant on the other to manage the finances, which can be crucial if a spouse becomes seriously ill or passes away.
Separate accounts are particularly useful when one or both partners enter the relationship with considerable debt. Joint accounts may be open to debt collection, liens, judgments, or wage garnishments. This means your money could be taken by a collection agency to pay a spouse’s delinquent loans or missed alimony payments. With separate accounts, you can choose to help a partner who is struggling, but it cannot be done without your knowledge.
The case for joint accounts
With a joint account, one spouse does not become the sole money manager while the other sits on the sidelines. By pooling your income into one account, you are both responsible for managing your money and building toward your goals. Joint accounts typically give both partners access to debit cards, checkbooks, and online banking, which enables both account holders to make deposits, withdrawals, and transfers.
Because both partners have access to the shared account, it may be harder to overlook financial issues, whether the account is overdrawn or there are signs of potential identity fraud. This access can also be useful if one spouse becomes injured or ill and is unable to access money to pay expenses.
A joint bank account may also provide an added layer of insurance. Both account holders are insured up to $250,000 by the Federal Deposit Insurance Corporation or National Credit Union Administration.
Marriage is intended to be a lifetime commitment, and there may come a day when one spouse passes away before the other. Joint accounts often carry rights of survivorship, which allow the surviving account holder to obtain the funds in the account without further action.
Whether you maintain separate banking accounts, a joint account, or both, trust and honesty are essential. You and your spouse should have a frank, realistic conversation about your shared and individual financial goals. No stone should be left unturned, including your expectations for how each of you will handle saving and spending. Ultimately, this conversation should help you decide as a team which route you prefer to take together.
Serving the communities of Western New York.
Find your local Five Star Bank offices.