Joint vs. Separate Accounts

Learn to manage your married money.

Ah, togetherness: Tea for two, a hand to hold, and a CD collection that's just doubled. Hold the harp music. Sometimes all that unity can be a pain, especially when you now have seven inactive bank accounts, 16 credit cards, two super club memberships, and a handful of abandoned 401(k) accounts spread across three states.

Merging households is hard enough (particularly when you get caught chucking his high school mix tapes in the trash). Combining your financial lives can often be the most difficult part of all. Money can make emotions run high -- and big disparities in salaries or differences in your spending priorities can make this process even more intense. Our advice? Take it one step at a time. For now, just focus on everyday money issues (checking/savings accounts and paying those bills). You'll have plenty of time later to worry about funding Fido's doggy college fund.

"HIS," "HERS," "OURS"
The good news about merging your finances: When it comes to deciding how you want to set up your accounts, the choices are fairly limited.

Your three options are:

  • Joint checking and savings accounts. (In other words, "What's mine is yours, darling.")

  • Separate checking and savings. ("Look at what a cute, independent couple we make!")

  • A joint account (checking or savings) as well as separate accounts (either checking or savings). ("My honey and I let each other have some space.")

So what will it be for you two? There's no one-size-fits-all solution -- instead, it's all about what feels right for your coupling. Here are some pros and cons for each scenario. Print. Read. Discuss. Make up. If you try out one option and it doesn't work, nothing is written in stone. Just try a different one.

JOINT CHECKING & SAVINGS ACCOUNTS
Advantages

  • Less paperwork. One account, one statement -- it's a pretty simple setup. A joint account is also likely to involve fewer maintenance fees (depending on your bank's policies) than two separate accounts.

  • Everyone knows the score. If you both see the statements, you both know exactly what's being spent and budgeting is easier.

  • Joint expenses are easy. Paying for doggy day care is simpler since you don't have to coordinate two accounts or figure out who pays for what.

  • You're a team. Emotionally, it feels like this is what marriage is about: What's mine is yours and what's yours is mine.

Disadvantages

  • Too many cooks. After all, how reliably did you balance the checkbook when it was just your account? Now you have to do it for two and may have to work a bit harder to avoid errors.

  • Some potential inequality. Are your salaries dramatically different, or does only one of you work? If so, the partner bringing home most of the money may feel penalized by a joint account. Occasional mood checks with each other (it's much easier to bring up problems when the other person starts the conversation) will help catch crabby feelings early.

  • Less privacy and independence. Since all expenditures are public knowledge, everything -- from what you spent on those adorable Jimmy Choo shoes (yeah, yeah, you bought them on sale) to what you spent on the anniversary gifts -- is now available for you both to see. Want a bit more privacy? Buy these things with plastic.

SEPARATE ACCOUNTS
Advantages

  • Autonomy. No need to look over each other's shoulders -- and therefore, no sweat justifying that $20 lip gloss.

  • More accurate accounting for merged households. In cases where one or both of you are remarried or have children from a previous relationship, separate accounts make tracking things like alimony and child support much easier.

  • Less sticker shock. If you married later in life or have different ideas about financial priorities, keeping your money in two distinct columns lessens the likelihood for fights -- especially those embarrassing ones in the grocery store checkout line.

Disadvantages

  • Clashing lifestyles. Again, when salaries are dramatically different, dividing expenses can get dicey. With separate accounts, it may not seem difficult to split fixed bills, but what about variable ones? Consider dividing expenses based on a percentage of income; you each contribute a similar proportion of your take-home pay to the family bills. And if one joint expense clearly benefits one partner, be generous and offer to cover that bill (if that partner is you), no questions asked.

  • Less communication. If you're solely responsible for balancing your own checkbook and putting money in your own IRA, there's little reason to discuss bigger money goals -- and a danger of assuming that your partner is taking care of things like retirement savings and vacation funds. Make a date to talk money. Serve popcorn and share your best monthly money move with one another.

  • More paperwork. Complicated households (and aren't they all these days with TiVo, cable modems, and the sprinkler-maintenance service?) have dozens of shared expenses. Double the accounts, double the paperwork -- particularly around tax time. Make bill paying and account balancing an activity that you do together. The lighting may not be romantic. But at least you can play footsie while you're organizing your ATM receipts.

SOME JOINT, SOME SEPARATE ACCOUNTS
Advantages

  • A little slack in the leash. Everyone spends way too much on some really embarrassing things. But if Elvis snow globes are your passion, don't hold back. Some separate accounts specified for individual pursuits lets you keep doing those (weird) things that make you, you.

  • Exposure to other money management tactics. When you sit down and go over your accounts -- those you have together and those in your own separate names -- you may pick up a few savings tricks from your spouse or discover that you live with a disciple of Warren Buffett.

  • Opportunity to be generous. Did you get a raise at work or a bonus check from your part-time gig? Go ahead and pitch in more to your joint bills. (You'll definitely get to pick the flick for movie night this week.)

Disadvantages

  • More up-front work. What are the "mine," "yours," and "ours" accounts supposed to cover? For example, does your separate account cover things like lunch when you forget to brown bag it? Gifts for your side of the family? What about joint money? Is that for childcare, family travel, and utilities? These are decisions you need to make before you start dividing your dough.

  • Joint expenses are harder. What happens when you add a new joint expense to the roster? A discussion, that's what. By deciding beforehand on things like paying for doggy day care, you can avoid complicated scenarios like coordinating two accounts to pay for one bill.

  • Increased opportunities for clashes. Is one of you always picking up the dinner tab? Does that leave enough in your account to fund your spa getaway with the gals? Just because your name isn't on your betrothed's account doesn't mean that you shouldn't worry about it. Check in regularly to make sure that everything's cool with how you two are covering the family expenses.

  • They say that couples begin to physically resemble one another over time. Your money views may evolve similarly too. After any lifestyle change (having a baby, getting a better paying job), be sure to revisit the joint vs. separate account issue.

-- Joanna Pompilio