Wondering whether you and your partner should combine all of your finances or keep some separate? Here is a pro-con list to consider while making your decision.
Millennials are doing things differently from past generations, especially when it comes to their cash.
According to a 2018 study by Bank of America, 28 percent of millennial couples keep their finances separate — compared with 11 percent of Gen Xers and 13 percent of baby boomers — and when considering starting a family, finances have a major impact.
Not only that, but 25 percent of millennials polled in the BofA survey noted that finances are a top source of tension in their household, which may be one reason millennial couples are keeping some of their assets separate when getting married.
Tatyana Bunich, president and founder of Financial 1 Wealth Management Group, says she is seeing more and more millennials not joining their bank accounts. Instead, they are keeping separate accounts and pooling together funds for a separate shared account.
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“This is very different from previous generations where everything is always joint, and stems from the fact that millennials more frequently are dual-income households,” Bunich says. “Many of these couples work out between themselves what goes into the joint account and they split up the financial responsibilities, the mortgage, the utilities, etc. It has to be something that they both are comfortable with.”
If you’re pondering whether you and your partner should combine all of your finances, or keep some separate, below is a pro-con review to consider while you’re making your decision.
With shared accounts, both people in the relationship can see the overall portfolio of their financial situation, which might mean there’s less tension over who is contributing more money.
“Everyone is contributing to one cause and there isn’t a ‘I paid for this, you paid for that’ mentality,” Bunich says. “I find that even though people agree to separate accounts from the start, there always tend to be issues that arise. Someone may make a decision on a large expense before consulting the other, and it can build a lot of resentment. One feels that over time they’re paying more or contributing more to the household.”
This method can also ease tensions in a relationship if the couple is planning on starting a family. Jill Caponera, a consumer-saving expert, says that joint accounts can help the stress that comes with family planning, if the mother is considering taking maternity leave, or becoming a stay-at-home parent.
“Having your family’s finances together will help to provide flexibility for the parent who may need to rely on their spouse’s income,” Caponera says.
Another major benefit is that shared accounts can help your credit score. Aviva Pinto, a director at Bronfman Rothschild, says that if both of you have good credit, combining accounts and using more on credit can strengthen both credit scores for future loans.
Pinto also says that from a tax perspective, joint accounts can save money because it’s cheaper to file jointly than to be married and file taxes separately.
Money in general can be an awkward and a hot topic to have to bring up again and again with your spouse. That’s why one con of a shared bank account are the conversations that can pop-up.
“Many couples get into arguments about spending,” Pinto says. “By maintaining a separate account, it diminishes the fights about why one spends money on a particular item.”
Even though divorce isn’t on your radar, and is hopefully something that never happens to your relationship, Pinto also advises that joint accounts can make getting a divorce more of a headache.
“If you come from a wealthy family and commingle funds — even if you think the marriage is solid and don’t want to think about it possibly breaking up in the future, 50 percent of marriages end in divorce,” Pinto says.
“It is important even without a prenup to keep assets that are trust assets or inherited assets separate. If you do divorce, anything that was kept in your name and not used for marital expenses will remain in your name.”
However, Pinto notes that any accounts that were commingled will be considered marital assets and will have to be split upon divorcing.
Another potential thing to think about is estate planning for the future, which Bunich adds can get messy when accounts are shared.
“When estate planning, joint accounts are a negative,” Bunich says. “If there are joint accounts, spouses will lose a step-up in cost basis when one passes away. Brokerage accounts are better to not be joint so that the surviving spouse can get that step up in basis.”
One last thing to consider is whether your partner has debt. If they do, Caponera says that combining finances can get hairy and even create added tension in the relationship.
“Having separate bank accounts in place while the partner with debt works on fixing their financial situation could be the best option to ensure you’re both going into a shared-financial situation on a level playing field,” Caponera says.