By Anja van den Berg
Financial management is always a sensitive topic when it comes to marriage and romantic relationships.
A study published in the journal Family Relations evaluated the diaries of 100 married men and 100 married women for 15 days to reveal that money is one of the main topics of marital conflict.
Another study, published in the Journal of Divorce & Remarriage, noted that 40% of couples stated that the way one spouse handled money was a cause of their divorce.
The question is one of the most important that couples will have to address: should partners have separate accounts, or should they combine their money?
There’s no ‘one size fits all’ approach, says The Money Advice Service. How you manage your finances will depend on your attitudes towards money. However, Amy Freeman, a personal finance advisor, says she would recommend that couples err on the side of caution when it comes to merging their money.
“If both people are actively maintaining their accounts and keeping track of their income and spending, it’s less likely that one person will end up blindsided by the other. Or that one partner won’t realise when the other drives the couple into debt.”
Merely being married to someone with a bad credit score won’t necessarily affect yours. However, as soon as you open a joint bank account or take out a mortgage together, your credit rating could be affected.
Perhaps the most significant drawback of merging your money with your significant other is that you assume partial responsibility for his or her poor financial decisions, Freeman warns. “You might not have had any debt before you started going out with or living with your partner, but when you merge your finances, your money may go toward settling his or her debt.”
Your partner’s spending habits might annoy you, but if he or she spends his or her own money on indulgences, it might not affect you. However, if he or she starts dipping into your joint account to make purchases you didn’t agree on, it’s a different story.
“There’s a chance that you and your significant other will argue about money more when you share finances,” says Freeman, “especially if it seems as if one person is spending more on him- or herself than on joint expenses.”
When you share accounts, the aftermath can get complicated when one or both of you decide that the relationship is over. Things can get particularly complex if you have shared debt.
However, Freeman isn’t completely opposed to putting all your eggs in one basket. “There are some definite advantages to pooling your money. For instance, opening joint accounts with your significant other makes it a lot easier to set shared financial goals and to be on the same page when it comes to your financial hopes and dreams.”
Freeman recommends a hybrid approach to managing your finances with your partner. This means that you don’t have to throw all your earnings into the same pot or share every single account.
Instead, she recommends that you consider opening a joint check account, a joint savings account, and a shared credit card. You can still maintain separate checking accounts and savings accounts for your individual goals or personal spending.
If you take this blended approach, you must decide how much each person will contribute to the shared accounts and when you can use the shared accounts. Above all, you need to be transparent and communicate often.
The Money Advice Service: https://www.moneyadviceservice.org.uk/en/articles/should-we-manage-money-jointly-or-separately
Money Crashers: https://www.moneycrashers.com/married-couples-combine-finances-separate-money/
Family Relations: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3230928/
East Coast Radio: https://www.ecr.co.za/shows/stacey-jsbu/should-couple-manage-their-finances-separately-or-together/
Journal of Divorce & Remarriage: https://www.tandfonline.com/doi/abs/10.1080/10502556.2012.682898