The data seems mixed on the touchy subject of unmarried couples merging their bank accounts together.
On the upside, cohabitating partners who mingle their money accounts can expect more “positive interactions” and can experience “evidence of clear communication” according to a new study from the Journal of Personality and Social Psychology.
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On the downside, couples who share bank accounts take a risk in doing so. A recent U.K. study on the topic concluded that 46% of “sharers” don’t know their partner's credit score and 25% don’t know the amount of their partner’s debt. Another one in six partners took cash from the account and didn’t pay it back after a breakup.
“The decision of whether or not to combine finances with your partner is a big step,” said Heather Housley, client services executive, consumer investments at Bank of America. “Sharing a bank account can affect your finances in many ways, both good and bad.”
On one hand, it can simplify your financial life by making it easier to pay shared expenses such as rent and utilities, and groceries. “It can also help you meet minimum balance requirements which could waive account maintenance fees and/or more easily save toward shared goals, like a vacation or new home,” Housley said. “However, combining finances can also mean reducing your individual privacy and future withdrawals without joint consent.”
Other household finance experts agree, adding that there’s no specific blueprint for commingling cash in a relationship – just bad outcomes if it's all not done correctly.
“The upsides include easier bill payments, streamlined budgeting, and fostering a sense of shared responsibility,” said Laura Wasser, a divorce lawyer and chief of divorce evolution at Divorce.com. “However, the downsides can include a lack of financial independence, potential disagreements on spending habits, and complications in the event of a breakup.”
Getting On the Right Path to Shared Household Financial Accounts
How can unmarried couples find a winning recipe when looking to share bank, credit card, and other household accounts? A successful commingling campaign starts with these action steps.
Start with a candid conversation. Simply talking with one another over the expected outcome and structure of planned household money accounts is a great way to start. “Discuss your financial goals, spending habits, and how to handle potential disagreements. You also need to establish ground rules for using the account, such as setting limits on spending or deciding how to split expenses,” Wasser said.
Catalog what you and your partner each bring to your relationship. “That means discussing issues like your income, savings, and investments, as well as any credit card or installment debts like student loans,” Housley said. “This will allow you and your partner financial transparency to identify expected expenses for the future.”
Chart your immediate course together. In having that honest conversation about your financial habits and objectives, bring up the tough questions about each partner’s financial obligations with shared financial accounts. “For example, know who will pay the bills each month, Housley noted. “Agree on who will you set a household budget and spending priorities. Also, consider whether a legal agreement would be beneficial in keeping any finances or assets separate,” she added.
Discuss your long-term joint financial goals, such as buying a home in the future. If your financial goals don’t align, “decide whether it makes sense to combine finances or maintain them separately to ensure you’re both prioritizing your personal goals,” Housley said.
Recognize the red flags that a joint account isn't working for one or both partners. “Some red flags that a joint bank account isn’t working include secrecy around how funds are being spent and arguments over contributions and withdrawals,” said Leslie Tayne, founder and head attorney at Tayne Law Group.
Have a formal agreement. Couples should also discuss having written/legal agreements between couples sharing a bank account about obligations, procedures, and problem management.
“When sharing assets and financial responsibilities, it’s always good to have a written agreement in place, just in case there are disagreements down the road,” Tayne noted. “For unmarried couples, it can help to have a cohabitation agreement, which is a written contract that can provide similar protections to married couples. This agreement can include rules surrounding shared accounts, as well as other types of property and debt.”
In the End, Do What Works For You
Many couples also have a mix of combined and separate finances and that’s fine, too.
“A couple may have joint checking and savings accounts but keep separate credit cards so that each person can build their own credit,” Housley said. “There is no one size fits all - it’s all about open communication to decide what is right for your relationship.”
Taking the long view is always a good idea, too.
"Regardless of the financial decision - from buying a house to sharing a bank account, each of the life choices a couple decides to pursue will have ramifications on other choices,” said Doug Dahmer, founder of Retirement Navigator, a financial services platform for people planning for their retirement. “More of one thing usually means less of another, and compromises must be made by both parties."
"As folks age, they'll also need to take in mind that they will have other limiting resources as well - time, energy, attention, health, relationships, and talents," Dahmer added.
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