Shared Finances vs Separate Bank Accounts – Which is Right For You?

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The Shared Finances vs Separate Bank Account Debate

At some point, every couple has the shared finances vs separate bank accounts conversation. But, as with all money-related matters, it’s rarely a straightforward process.

Let’s look at the 3 most common options for couples to manage their finances, to help you choose what kind of strategy may work best for you…

1. 100% Shared finances

In the ‘traditional’ idea of shared finances you combine your expenses, savings and sometimes your debt accounts, like credit cards and loans too. Everything becomes “ours”.

Wages from both partners are transferred into shared accounts.

This reduces the level of ‘life admin’ and the fees required to maintain two of everything – the most obvious benefit here is simplicity.

Money disputes are a leading cause of relationship stress. Therefore, eliminating the need to discuss every expense, each time someone buys groceries or fills up the car, can considerably ease couple tension.

However, this 100% shared finance option doesn’t suit everyone. There is sometimes friction when one partner has a large debt and the other has none. Or if one earns a much larger wage, or spends a lot more on personal items.

Pros and cons of shared finances

Shared finances really cuts down on “life admin”. It just makes things a lot easier, and can make a couple feel more united, emotionally, too. When everything is shared, money is never referred to as my money or your money, it’s just our money. We’re in this together.

Another positive is that it’s great to see how much faster savings accounts grow in a joint account. With two people regularly putting in cash, you reach saving goals quicker.

There are things to consider, before making the leap into shared finances though. What happens if things go wrong between you? Most types of joint bank accounts give both of you equal responsibility – and that includes debts. What if one of you is more frugal than the other? And what happens if you want to buy your partner a gift they shouldn’t see? (Paying cash is an easy solution to that last bit.)

It’s definitely a good idea to talk to a financial advisor before you take the shared finances leap, just to make sure you are across all the pros and cons of a 100% shared finance relationship.

2. Separate finances

Separate bank accounts keep all of your finances and debts separate from your partner’s. Recent surveys show that one in four couples have completely separate finances. The trend is more pronounced among younger couples who earn a full-time wage and are used to having financial control over all aspects of their lives.

Often, these couples find it harder to give up their independence and the “freedom” of having their own bank account.

Separate bank accounts may also work better when there is a large difference in income, or when a relationship is quite new. It’s also more common when one person has pre-existing debt, from loans or credit cards. As we noted earlier, this relationship ‘inherited’ debt can be a point of friction for couples with shared finances.

But what happens when you need to top-up essentials, like groceries, when you have separate finances? Who pays for those? And what about nights out?

Every couple is different, with some having much less structured financial arrangements than others. When we spoke to a few people who kept their finances separate, they had quite varied ways of managing their expenses:

For example:

• the highest earner picks up the costs of social activities.
• expenses are split, so one pays the rent while the other pays the bills.
• they take turns to pay for things like bills, shopping and entertainment.
• less common are couples who go as far as keeping a diary of expenses to be reimbursed, so they don’t pay more than their share.

It appears that, when it comes to separate finances, some kind of strategy is still needed, so that you both contribute to housing and living expenses reasonably fairly.

Pros and cons of separate finances

Split bank accounts are great for couples who want to keep their financial independence while in a relationship. But, keeping everything separate has both pros and cons – generally, it’s more suited to people who aren’t too concerned with everything being completely equal.

There is a need for open and honest discussions, and some kind of strategy for expenses. Without this, it’s easy for bills and expenses to be paid twice, or missed completely. It’s also possible for grey areas to creep in around each partner’s financial situation. We spoke to someone whose partner racked up a huge credit card debt without them knowing. It only came to light when they approached a bank for a loan.

Let’s face it, money is a common cause of arguments amongst couples. So, if you’re about to start house hunting with your other half, talk to an expert about it all. They’ll be able to establish which financial structure is best for you both, so all you have to argue about is the colour of the sofa and the size of the TV!

3. Shared Finances AND Separate Bank Accounts

If neither shared finances nor separate finances appeal to you, you can arrange a combination of both.

How it works: Each partner continues with their own personal bank account(s), but together set up a joint account to service regular bills, living and housing expenses.

This is a happy medium between 100% shared finances and 100% separate finances. It reduces ‘life admin’, and it allows for automated payments from one joint account (or more if required, down the track). It also lets both partners retain a degree of financial independence.

Pros and cons

A mixture of shared and split bank accounts is great for establishing a middle ground. Perfect if you don’t want your other half to know how much your mani/pedi costs – or the extent of your craft beer obsession. But also a great way to keep the financial side of your shared lives less complicated.

However, as with separate finances, there may not be a complete understanding of your partner’s financial situation. There is always the chance that they may have debts you’re not privy to, that may cause issues if you plan to get a home or other type of loan together in the future.

What if we get divorced?

Simply having separate bank accounts is not the same as having a legal financial agreement. Under Australian family law, property settlements after separation are rarely as simple as each person keeping what’s in their own account. The court generally considers the total “property pool” including all assets and debts of both partners, along with each person’s contributions and future needs, regardless of whose name assets are in.

Even assets you acquired before the relationship can be considered in the property pool, although courts may adjust outcomes to reflect who brought what into the relationship. If you want to make clear arrangements about how finances would be divided if you separate, you should talk to a lawyer about a Binding Financial Agreement, and talk to your partner as well! Simply keeping separate accounts does not determine what happens if you separate.

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How does living together affect your taxes?

If you’re moving in together, remember that this will also affect your taxes. We’ve covered for you too, so have a read through our Tax Guide For Couples.

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