In my business of advising couples on financial issues of divorce, married individuals ask me if they should have joint or separate financial accounts. I never know what to tell them because I see divorcing couples who have pooled their money as often as those who have chosen to keep their money separate. Since my experience does not qualify as a statistical sample, I recently looked for articles to identify a consensus on one side or the other. As with many questions in life, the answer is “it depends.”
There is new research concluding that couples who pool their money are happier with their marriages than those who keep finances separated. But there are also valid reasons to keep your money separated, and a happy marriage is still possible. There are enough online articles to gather plenty of reader comments on this topic. Generally the readers who agree with pooling money wrote positive and polite comments. The few dissenters tended to write angry comments about the folly of trusting anyone with your money. I suspect the unhappy comments were from people who have had disastrous marital experiences related to pooling money.
A 2012 survey conducted for the American Institute of Certified Public Accountants (AICPA) by Harris Interactive showed that finances can cause rifts for American couples. Among those aged 45 to 54, the average number of arguments over money is four per month. Three in ten adults who are married or living with a partner owned up to potentially deceitful behavior about money. Disagreements about money rank higher than arguments about children, chores, work or friends. 58% of these arguments are over “needs” versus “wants.” Nearly half argue over unexpected expenses and a third fight about inadequate savings. “Money is a lightening rod for conflict in relationships, because it’s a sensitive topic and each person brings a different perspective based on past experiences,” says Jordan Amin, former chair of the National CPA Financial Literacy Commission (to which I was appointed a member). “It’s critical for couples to communicate openly and regularly about financial matters in order to establish a common language around money and move toward shared goals.”
Dave Ramsey goes a bit bolder with the opinion that men take more risks and don’t save for emergencies while women see money as a security issue. I have seen many couples who break this mold, but I agree that couples with dissimilar money attitudes and a lack of open and effective communication struggle more with financial issues than do couples who share similar financial values.
Sociologists who conducted a study of Swedish married couples concluded that women highly valued having money that was defined as “mine” versus “ours” because it made them feel fiscally independent. Having some independent money gives each person the power to spend that money as they please. This can diminish a struggle for control between the individuals, which is a good thing for marital harmony. Quasi-independent financial arrangements come with the sticky points of negotiating how to fund the joint account and which expenses are paid from that account. For example, is my daily Muldoon’s cappuccino a joint expense, or is my caffeine addiction my own problem?
To be successful and avoid conflict when you have separate finances, you both need to talk openly about money. How do we define what is household spending? How much is yours versus mine? Shall we allocate based on relative income levels?
While these particular questions do not apply to pooled money couples, those couples also need to talk regularly about money. The need to openly communicate is the same whether you pool or not. Dr. Terri Orbuch, a psychologist at the University of Michigan’s Institute for Social Research and author of the book Finding Love Again: 6 Simple Steps to a New and Happy Relationship says that each person needs to reflect on their own money values. Share your money background with your significant other. Talk openly about your financial goals and how you feel about spending and saving.
Talk money more often – not just when it’s tax time, when you have high debt, or when bills come along.
If studies show that pooled money couples are happier than separate money couples, did the pooling make them happier or were they happier to begin with? Are the couples who keep all their money separated the least happy because they previously learned they could not trust their spouse with the family money? I have not found answers to this chicken-or-egg question. However, I did read that couples who set aside 5 percent for independent discretionary spending are just as happy as those who pool every dollar.
Advocates of pooling money say that combining finances reinforces the trust the two of you have and that this helps you get through the tough times. They say that independent money is a sign of a lack of commitment. Pooled money is easier to manage and to access cash as well as simpler to stick to a budget. However, if you must continually watch the bank balance because you are married to a spender, you may see pooled money as more difficult to manage.
Tips for Couples
Keep it Open. Before making a commitment, offer to share your financial details. Trade credit reports. Routinely review credit card and bank statements. Share stories about how money was handled and discussed when you were kids.
Set a Money Date. At least once a month – preferably weekly – shut down the computers and turn off the phones. Have a focused conversation about money and goals, both short and long-term.
Divide and Conquer. In many households, one person is the chief financial officer, understands the investments, compiles the annual income tax information, and generally has the big picture well in hand. While this may make life easier in your relationship, this imbalance of involvement can cause confusion and stress. Share the duties. At tax time, one person can compile the income data while the other assembles the spending and deduction documents. One person writes the checks while the other balances the checkbook.
Hire an Advisor. A neutral third-party is sometimes a good option to avoid tensions about money. A financial advisor can work with you to create and attain short-term and long-term financial goals, secure a funded retirement, monitor accounts and notice any unusual spending patterns, should they occur.