Advantages and Disadvantages of Combining Accounts

One of the first money questions that come up when singles become couples is, ''Do we pool our finances or keep them separate?'' Retirement plans and IRAs must be kept separate, but what about checking and savings accounts?

This is an area where one size definitely does not fit all, but here are some guidelines for making the right choice for your situation.

First rule: Don't make any big changes until you've both had a chance to get used to your new life together. You can start sharing expenses right off the bat, but postpone consolidating your accounts, at least for a couple of months.

Next, sit down with your partner to discuss:

  • Which expenses will you share and which will you keep separate?
  • How are you going to split the shared expenses (50-50, proportional to income, expense by expense)?
  • Will one person take charge of paying the bills or will you each pay assigned expenses (for example, will you pay the mortgage while your partner pays utilities and groceries)?
  • How you are going to save for big expenses, such as vacations?

You probably have some idea of each other's money skills. If one of you whips out the checkbook each time the credit card statement arrives and the other lets the bills pile up on the kitchen table, you know which of you is the money manager.

One Checkbook

This system worked for most of our parents. Paychecks were deposited in a joint checking account, one partner paid the bills and the other got an allowance or occasional blank check when needed. This system works if you take turns as the holder of the checkbook or if one of you takes care of the checkbook and the other manages the money market account or the investments. However, if you're each used to managing your own money (particularly if you each work), it can be tough to give up your checkbook.



One Checkbook continued...
Advantages:

  • Only one checkbook to balance.
  • One partner is in charge of the money.
  • Strong feeling of partnership -- what's mine is ours and what's yours is ours.

Disadvantages:

  • Nightmarish reconciliations if ATM withdrawals and single checks aren't recorded by non-checkbook-holding partner.
  • One partner is let off the hook of the mechanics of bill paying and may feel less responsibility for the household budget.
  • No discretionary money.
  • One partner can empty out the account without the other partner's permission -- or knowledge.

Two Checkbooks

This is probably the most popular system because each partner shares in maintaining the household budget yet each retains some independence. Two checkbooks make sense if you split common expenses (you pay the mortgage and your partner pays for food and utilities, for example) and you each pay for personal expenses (car or student loan payments, clothes, gifts). Often, two-checkbook couples have a joint money market or savings account for emergency cash, or a vacation or furniture fund.

Advantages:

  • Bill-paying responsibility is shared.
  • Decisions on personal expenses can be made individually.
  • Each partner continues to build a credit history.

Disadvantages:

  • Some shared expenses such as eating out or going to the movies aren't as easily handled. Did you pay last time or did I? What happens when you pay for breakfast at McDonald's and I pay for the sushi dinner?
  • If the mortgage is paid out of one checkbook, that partner will get credit for the timely mortgage payments even though both contributed. Some couples put both names on both checking accounts even though they each take charge of one account.
  • Diminished feeling of sharing.



Three Checkbooks

Yes, some couples maintain three checkbooks: yours, mine and ours. If each of you feels strongly about keeping an individual checkbook for personal expenses but you want to share a household account for the mortgage, utilities and groceries, then three checkbooks may be the way to go. This may also be a way to start off while you're trying to settle into a pattern of joint spending without relinquishing control. With this system, one partner is typically the keeper of the joint account and takes on responsibility for paying the bills.

Advantages:

  • Independence plus sharing in one system.
  • Separate credit histories but joint credit for items such as the mortgage.

Disadvantages:

  • 3 checkbooks to balance and (potentially) 3 sets of bank fees.
  • Reliance on both partners to fund the household account each month -- or the mortgage check could bounce.

    Any system can work if you have established a fair way to handle shared expenses and guidelines on which expenses come out of the household budget. It's also a good idea to start using a personal finance program such as Quicken to track multiple accounts into one file and get unified reports. Just make sure you each have a miscellaneous account for your ''no questions asked'' money.

    If you opt for separate accounts, start a joint money market account for big expenses like vacations and home furnishings. You can start a money market mutual fund with as little as $50 a month. Most come with free checking, and you can set it up to require two signatures on each check -- just in case.

    No matter how you and your partner set up your accounts, I encourage women to keep a separate account to build and maintain their own credit history. Also, make sure you stay in the bill-paying loop and know the status of your accounts. It may be reassuring to think we'll always be with a partner, but the statistics are stacked against us: Eight out of nine women will be on their own at some time in their adult life.

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