Money and Marriage: Joint or Separate Bank Accounts? - For What It's Worth - Comcast.net Finance

Jon & Kate Plus 8 have a natural talent for sustaining their life drama. And so it came as little surprise that Jon Gosselin recently "cleaned out" their joint checking account, leaving Kate with a paltry $1,000… or so Kate claimed.

Kate said that Jon withdrew a total of $235,000 from the joint account. Later, a Pennsylvania judge ordered Jon to return $180,000 to Kate. As for the remaining $55,000? Kate must have miscalculated. (The Court is requesting that Kate provide an accounting of how she spent this amount.)

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This situation, however, reveals more than Jon's short-sighted move, Kate's possible dishonesty… or their unwavering aptitude for keeping themselves in the spotlight. It depicts the obvious: For couples enduring divorce, joint checking accounts can be quite a nightmare. Sagas about missing assets, emptied accounts and frozen credit cards are certainly not unheard of. But even some of the happiest married couples, it turns out, have some qualms about joining their finances to become one.

The Independent Way

According to a recent Parenting.com poll, nearly 48 percent of respondents believe couples should have separate bank accounts. As an Associated Press article suggests, maintaining separate accounts may help some people "avoid conflict and maintain a measure of independence." Taking a close look at each other's spending habits is imperative when deciding how to manage your finances. The article explains:

"A key issue is each person's attitude toward money. If one is a 'spender' and the other a 'saver,' trying to completely combine finances may create problems. Similarly, if one person is meticulous about recording transactions and the other is not, disagreements or costly mistakes may result."

A prior marriage or children from a prior marriage may be another reason for a financial divide. Couples have varying views on whether child-support expenses and accrued debt or assets from a past marriage should be welcomed into their new union. Motives to protect an inheritance can also weigh in.

Liability issues also are an area of concern. "If one partner is in a profession with a high risk of lawsuits, like health care, or owns a business that could get sued, having only joint assets could endanger the couple's financial stability in a worst-case scenario," the AP article suggests.

These reasons make up a small sampling of why couples choose to be financially solo. Other justifications vary in nature, from a strong need for independence (will my spouse monitor every purchase I make?) to generosity and spontaneity (how can we buy gifts for one another without having to use "our" money?).

What's Mine Is Yours

It used to be expected that when couples join in marriage, they join their finances. And today, this can still be the right solution for many. For starters, a joint bank account symbolizes commitment and trust.

Logistically, a joint bank account also clears up any confusion about who will contribute specific amounts to household expenses, kids' college funds, loan payments and so on. It cuts back on the administrative hassle. Meanwhile, it forces transparency about spending habits, since every purchase is out in the open. This fosters an open dialogue about whether you're spending wisely and budgeting enough, both in your individual actions and as a team.

This system works best when one person is generally in charge of the finances. However, it's equally important that each spouse plays a role in managing money. As the previously referenced AP article explains:

"In many relationships one person will take control of the money while the other remains unaware of details about things like bank accounts, investments and even household expenses. That is fraught with potential problems, particularly if something happens to the person in command."

This system also makes sense for families with a stay-at-home parent. With just one income, there's simply less of a need to maintain separate accounts.

Yours, Mine and Ours

As noted in an Oprah.com article, merging love and money with a three-pot system is an increasingly common approach. This involves setting up three accounts -- two separate ones and one joint account. Have your paychecks deposited into your individual accounts and then contribute an equal percentage of your individual earnings to the joint account.

On the other hand, if only one spouse works, it's not a bad idea to work backwards. Deposit all earnings into the joint account and then budget for a certain percentage to be transferred into each of the two individual accounts, the Oprah.com article suggests.

With this system, couples can organize their family expenses while still giving each other some financial independence. This system is also useful for couples that dragged substantial debt into the marriage, like credit-card or student loan debt, and want to tackle it separately.

The joint/separate approach does mean more administration duties up-front. It's also important that both spouses are acting responsibly with their individual accounts, and these accounts -- even though independent -- should still be a topic of discussion in money matters.

The bottom line: There's no "right" way for everyone. Talk openly with your spouse about what works best for you, and re-evaluate your method from time to time to determine if this is still the best approach. Regardless of the system you choose, honesty and open communication can go a long way in ensuring successful money management.

Do you have joint or separate bank accounts? Have you found there are challenges to this approach? What are some of the benefits? Share your thoughts.

-- The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.

Message Edited by Renee_DeFranco on 10-16-2009 03:54 PM