Does Cupid’s Arrow Point to One Checking Account or Two?

The second month of the year – it must be the season of love! I can’t help but a feel a little nostalgic this month, as I got engaged in frigid February – many years ago! Much has transpired since then, but one thing I’m always thankful for is that when it comes to finances, my sweetheart and I have always been on the same page. Whether you’ve just been hit by cupid’s arrow or are planning your big wedding day, it’s never too early to start thinking about you and your partner’s financial styles. There are a number of key issues to explore to ensure your goals line up. Don’t pass GO without thoroughly exploring these issues first!

Assuming you’ve addressed and come to an agreement on the crucial issues, how will you manage your day-to-day finances? It all hinges on the ever-popular checking account to keep the money flowing in and out to all the right places. So here is where it gets tricky. Is a joint account more your style, or are you looking to keep things separate?

Joint Account

For the financially disciplined and trustworthy, a joint account has a lot of appeal. Both parties contribute any earnings and pay any expenses from one checking account. In some ways, this simplifies things – you only have one account to keep track of. However, at any given time, both account holders must know what funds are flowing in and out to avoid an overdraft error. My husband and I have shared a joint checking account since we got married, and it’s worked very well. We’ve never overdrawn the account and both can check in on the status of our account through online banking access. I think mostly this works for us since we have one primary person who acts as “CFO” of our finances. I balance our checkbook, pay all of our bills and transfer all funds in and out. When it comes to making daily purchases from the account (on a debit card, for example), that can be a trickier financial dance. Open communication and a daily checkbook balance can keep things in check. In my household, my husband has a credit card in his name and I have one in my name. We each have a monthly budget to follow and then pay the credit card bill in full each month from our checking account. That way we don’t have to worry day-to-day about individual purchases and our daily checking account balance.

I would be remiss not to mention that there are risks to joint checking accounts – particularly when marital discord enters the equation. Both signers on a joint account have equal rights to the account – so one party can withdrawal all the funds and hit the road, leaving the other party with empty pockets. Bankrate.com’s contributor Roxanne Hawn reviews other pitfalls in her article “Risks of Joint Bank Accounts.”

Separate Accounts

For the financially independent, separate checking accounts allow each person to control his/her own spending and earnings. For partners that have similar incomes, this separate but equal approach can work. Assuming the bills are split proportionately and each person can comfortably cover their allotted expenses, this strategy makes sense for couples with contrasting organizational styles or independent financial interests. Just a warning– like any other marital issue, good communication and trust are key to making this strategy work. If your partner is paying joint bills from his/her account, you need assurance that those expenses are being paid.

A Hybrid Approach

Looking for a little financial independence in the midst of the marital merging of finances?  Maybe three checking accounts provide the perfect balance. The thought of managing multiple checking accounts might sound like extra work – but consider this strategy. One joint account can be used to solely pay joint expenses. Any earnings are originally deposited there. Then each partner also has a separate, individual checking account. A monthly allowance is transferred to the separate account for each person. It is, in essence, a “personal spending account.” You balance your own savings and spending in your personal account but work together with your partner to keep your joint account in line and ensure that the bills get paid!

Whatever strategy you choose, I wish you luck navigating through the decision. Keep in mind, you can always change course if the option you choose looks good on paper – but doesn’t work for your financial style. Need more help making a decision? Your banker can walk you through it or answer any questions to get you started. Best wishes to you and your sweetheart on your financial journey!

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