Some accounts were meant to be separate. Retirement accounts are an excellent example. Others are probably better off being joint. Joint access to an emergency fund means that either partner can act in case of an emergency, and having two sets of eyes on the account can put a stop to frivolous withdrawals.
But checking accounts are practically their own animal, and there are pros and cons on both forms of ownership, separate and joint. I have a bias toward separate accounts. My wife and I have been married for 16 years and the separate arrangement has worked so well that weâ€™ve never even entertained the idea of a joint account.
Separate checking accounts
There may be more advantages here, but below are five compelling reasons favoring separate accounts:
- Each person has a sense of control over some piece of the household budget. Call it â€œmad money, â€ or whatever you will, but just as each of us needs our own small space in the home, and our own separate collection of personal stuff, we also need our own financial â€œspace.â€
- It eliminates the possibility of two people drawing from the same account and the overdraft fees that can result. Debit cards compound the potential for this.
- It avoids the prospect of trying to keep track of each spouses expenditures in one account.
- It creates diversification. If a problem, like identity theft, causes one account to be closed or suspended, the couple can continue operating out of the otherâ€™s checking account.
- It can avoid a lot of fights related to money. Each spouse is responsible for their own account and canâ€™t blame the other for messing it up.
- It splits responsibility for household finances between both spouses.
Another thing that we donâ€™t like to think about is the ability of each spouse to handle their finances in the event of divorce or the death of the other spouse. How often do you hear of situations in which the financially-minded spouse dies, and the surviving spouse is clueless about handling the checkbook?
In many respects, managing a checkbook â€” and the bill paying thatâ€™s attached to it â€” is the single most important component of money management. If one spouse is shielded from that function, the shock of losing a spouse will be that much greater.
Joint checking account
Iâ€™m able to come up with just as many reasons why a joint account would be preferable, and you might be able to come up with a few more:
- No need for two separate household budgets, which may not be the most effective way to minimize expenses.
- It eliminates the yours vs. mine conflict, and creates a sense of â€œwe.â€
- It can neutralize a spouse who is weak on finances and budgeting, but only if the â€œstrongerâ€ spouse controls the checkbook.
- It can maximize the accumulation of savings by centralizing bill paying and allocation for savings.
- It creates a division of labor, or specialization of functions within a marriage. One spouse may handle the finances, while the other takes charge of kidsâ€™ schoolwork. Each function is important, each makes a contribution to the household, but in different ways.
- A joint account results in half as many bank fees as compared to separate accounts.
In addition, as Nickel has pointed out, a joint account makes complete sense for a single income couple.
Separate accounts have worked beautifully in our marriage, but different arrangements work for different couples. Which do you prefer, joint or separate? What are the advantages and disadvantages that you’ve discovered?