Every couple has ‘the conversation’ about sharing finances. But, as with all money-related matters, it’s rarely a straightforward process.
We discuss all of your options below…
Shared finances or keeping things separate
The ‘traditional’ idea of shared finances involves a couple simply merging all their financial assets. So, you combine both savings accounts and debt accounts, like credit cards, and transfer the wages of each person into a single account.
This reduces the level of ‘life administration’ required to maintain two of everything – the most obvious benefit here is simplicity.
However, recent surveys show that as many as 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 their individual financial control.
Often, these couples find it harder to relinquish the financial freedom of having their own bank account.
Separate bank accounts may also be used when there is a large income disparity or when it is early in the relationship. They are also more common when one person has high pre-existing debt from car loans or credit cards.
But, let’s look at some specific financial decisions a couple needs to consider before they decide the best option for them.
Separate bank accounts often require a schedule for who buys what. Each person takes turns to pay for things like bills, shopping and entertainment.
You might need to top-up throughout the week to buy essentials, so who pays for those? And what about petrol and car costs? If one member of the couple commutes on a bike while the other drives, who pays for the fuel costs? Should the partner who pays for one thing keep a running diary of expenses to be reimbursed so they don’t do all the financial heavy lifting?
On the flipside, a joint bank account where all of the couple’s expenses come from simplifies most of those things.
Money disputes are a leading cause of relationship stress. Therefore, eliminating the need to discuss expenses every time someone buys groceries or fills up the car can ease tensions. A single account makes it incredibly simple to set up and administer joint finances.
Applying for a loan
When you apply for a loan, banks look favourably on couples who have had a joint account for a period of time before applying. Banks will look at income and expenses when determining suitability. So showing that they are all in the one place is a plus.
If you and your partner are considering a joint purchase of a home or other big ticket asset it may very well be worthwhile combining your finances sooner rather than later.
Equity and emotional issues
If one partner becomes sick, is injured or takes time off to care for children or ageing parents, they will cease to earn a wage.
With separate bank accounts, the wage-earning partner will have far more control over the household finances. This may be appropriate in some cases, but can often be a source of stress.
On the other hand, if the couple has a joint account, household finances can continue relatively unchanged.
A third way: Shared finances AND separate accounts…
Maybe neither of the two previous shared finance options appeal to you? There is another option which is a combination of the two.
Each partner could choose to continue with their own personal bank account, but also set up a third joint account. Both partners then regularly transfer a certain amount to that account. This amount pays for household expenses (e.g. internet, electricity and groceries) while sending the rest to their personal account.
Down the track you may have larger financial commitments like a home loan. Then you may eventually choose to flip the set-up so your wages go directly into the joint account with smaller amounts transferred to personal accounts as ‘play’ money each week.
Please note, the information contained in this article is general information only and should not be taken as detailed advice. If you are planning to combine your finances and invest, set up a joint self-managed super fund or get couples health insurance, there could be consequences for your taxes.
Get in touch with us at [email protected] and we can discuss your individual circumstances in more detail to provide and provide you with tailored advice suited to you.