When you’re at the stage of a committed relationship where you’re sharing finances, then sharing accounts can also make sense. When you’re saving and spending together, why not keep money in the same place?
It’s no surprise that many American couples only choose to stick with common accounts. But that’s not the wisest approach either.
This is why it’s important to keep financial autonomy in a relationship — and how to do it right.
Problems with shared accounts
There’s nothing wrong with common accounts. They can make it easy to budget together and allow for financial transparency between partners.
According to a survey from Creditcards.com, it becomes a problem when a couple has only a common account, which is true for 43% of adults in the United States who are married, have civil partnerships or live together, according to a survey from Creditcards.com.
Older generations are more likely to have only common accounts. The survey found that 48% of Gen Xers (42 to 57 years old) and 49% of new children (58 to 76 years old) were married or living together with only a joint account, compared to 31% of millennials (26 to 41 years old).
Younger people are also more likely to have only separate accounts. For example, 45% of younger generations (ages 26 to 32) who were married, had a civil partnership, or lived with their partner did not share any accounts, compared to 20% of Gen Xers and 14% of those who had just given birth.
No matter what age you are or how long your relationship lasts, it’s important to maintain at least some financial autonomy. While common accounts are convenient, not having any separate accounts can lead to a number of problems.
Let’s look at the following underlying issues.
When you share all your accounts with your significant people, you’ll rely on them to make the right financial decisions. Your personal financial health depends on the other person’s spending habits.
If your partner is in debt without discussing it with you first, you are still responsible for that debt. If they overspend, your budget will also suffer. Or, if you make a financial decision that your partner disagrees with, you will be held accountable for its impact on them.
Lack of self-control
When you switch completely to common accounts, you may be giving away some of your autonomy.
If you and your partner have both built careers and financial assets, combining fully finances and sharing all accounts can be a challenge. If you don’t earn and spend the same, conflict can arise. Moreover, you and your partner may start to feel compelled to ask permission before spending money, which can lead to frustration.
You should be extra careful if your partner is the sole breadwinner. When you completely rely on others to financially support yourself and don’t have your own account, there can be a significant power imbalance. You may also feel like your financial well-being depends on your relationship, which is never a healthy motivator.
The problem if the relationship ends.
It’s not a pleasant thing to consider, but any relationship can end. In the event of joint accounts, the breakup can become messy. If one of the partners wants to delete all common accounts, there is nothing stopping them. Not to mention, these funds can give you a headache to split in the event of a divorce.
Things can get more complicated when there is financial abuse. Not having any separate accounts makes an abused partner particularly vulnerable and can prevent them from getting out of a dangerous situation.
How to successfully manage common accounts
Despite all the limitations, a check or general savings account can be a useful tool for managing money in a relationship. You just need to know how to use it correctly.
Here are some tips to do that:
Maintain a healthy balance of common and private accounts
You can share a few accounts — for example, to share costs and save — and have a few accounts of your own.
In this way, you have more financial transparency to be shared but still be able to retain your autonomy.
Continue the conversation about finances.
Talking about money is rarely fun, but what matters is whether you share an account or not. Financial autonomy does not mean that such conversations will end.
This is a constant struggle of many people. For example, according to a survey from CreditCards.com, millennials are the most financially autonomous generation, with 69 millennials of whom significantly have at least some of their own accounts. At the same time, 48% of the younger generation who were married, in civil partnerships or cohabiting had kept their finances a secret from their spouse or current partner.
Current budgets, goals, and obstacles should be a constant conversation for any couple. Whether you share all your accounts or don’t share any accounts, staying in touch openly and regularly will help you achieve financial transparency — and make such conversations less difficult over time.
Decide how you will contribute to shared accounts
Let’s say, you have a few separate accounts, perhaps a general checking account for general expenses and a savings account to buy a home. In this situation, it is important to discuss how much each of you will contribute to these accounts.
It’s easy if your income is equal — just in fifty. However, that rarely happens. If one of you is making significantly more money, then the other will be hard pressed to pull the same weight. Instead, let’s see how you can make it fair to both of you.
A good way to do that is to use percentages. For example, in the above situation, if your shared expense is 35 percent of total income, then each of you should contribute 35 percent of your salary to your general checking account. You can then agree on the percentage you would spend on your home purchase savings each month.
You can also come up with your own solution. The main thing is to be honest and make sure no one leaves the conversation that contains resentment.
The bottom line
Many American couples only have a common account. While joint accounts are convenient and allow for financial transparency, they can also cause problems both in your relationship and in your financial life. Potential problems include a lack of autonomy, shared responsibility in case the partner makes a mistake, and problems that may arise if the relationship ends.
To avoid these, make sure you maintain a healthy balance between shared and private accounts, discuss how you’ll contribute to shared accounts, and continue the conversation. After all, when it comes to general finances – just like with anything in a relationship – communication is key.