Editor’s note: This article was first published in September 2014. The remark that most married couples have one partner out of work reflects Spain’s unemployment during the 2014 crisis and overstates the situation even for that time.
A while ago we talked about the 5 conversations about money that couples should have before getting married, because marriage today is nothing like our parents’ marriage.
In the past, for better or worse, couples got married and the wife immediately devoted herself to running the house and looking after the children, while the husband went out to work. As a rule, the man’s income was enough to cover all the family’s expenses and needs. At the time of the wedding there were no questions to ask, even if both husband and wife worked. The household finances were one and the same.
Things have changed now: in new marriages, women work just as men do. Other things have changed too, and most marriages these days don’t tend to last very long.
The other day I found out that a friend of mine, whom I hadn’t seen in a long time, had got married. I phoned to congratulate him, but he was already separated. So, considering the divorce statistics and the many problems caused by that other thing that isn’t the most important (money), the obvious question comes up: is it better to have joint accounts or separate ones? Not with divorce in mind, but with a view to avoiding arguments about money that can end in divorce.
As someone once told me, in different words but basically: “Love, care for and make love to your wife as if your marriage were going to last forever, but handle money matters as if you were getting divorced tomorrow.”
What account options do we have?
The truth is there’s very little choice, and none of them is free of drawbacks. We would have:
- Joint accounts (apparently not very advisable these days from a financial point of view if there is a divorce).
- Separate accounts (advisable but problematic).
- A combination of accounts (advisable, but a whole mess in itself).
1. Joint accounts
All the income of both partners goes into the same account, where both know how much money comes in, how much goes out and which direct debits are charged to it. It’s the method our parents used and the one chosen by most families whose marriages were signed for life.
The disadvantage of this system is that one member of the couple has to give explanations every time they make a significant purchase, and even if no explanations are asked for, the other person is in control. You can’t even buy your partner a surprise present without them first seeing a cash withdrawal or a credit card charge.
Sometimes, as is normal, one partner earns more money than the other, and it may be precisely the one who earns less who spends more.
In short, both spouses lose financial control when it comes to an individual savings plan. Most divorced people regret having had joint accounts, because afterwards they run into certain problems and some damage to their finances, especially when one of them was more savings-minded than the other.
2. Separate accounts
These are ideal when one spouse has trouble controlling their spending or had financial problems before the marriage. This approach lets each partner keep their financial independence. Household expenses are split, although inevitably the partner with the higher income will also have to cover the larger household costs, because that’s what marriage is.
On the other hand, separate accounts can end up being inefficient and make managing the family’s money somewhat more complicated. If one partner becomes unemployed, it creates a kind of burden for that person, who will feel they are squeezing their partner financially.
3. A combination of accounts
Messy as it is, this is probably the most advisable option if we think about divorce statistics.
With this system, a joint account is used for household expenses and all the direct debits, while each spouse’s income is kept in separate accounts. That way each spouse contributes to the shared expenses in an agreed percentage according to what they earn, but keeps control of their own personal finances. The spouse who is more of a saver will have more money, and the bigger spender will obviously have less.
In the event of a separation, it also avoids having to make some changes.
It has to be said that all this is a lot of theory and would be easier to apply in good economic times, because these days most married couples have one partner out of work. In other couples both partners are unemployed, so it’s a matter of getting by however you can as a family unit.
Even so, since maths and statistics matter a great deal where money is concerned, and given the statistics on failed marriages, you should avoid anything that amounts to a long-term joint investment, because statistics say that 80% of young people’s marriages will not reach retirement together.
And for more personal cases, involving more delicate questions about assets owned before the marriage, a good adviser can give you some advice on how to shield part of those assets, because a separation of property regime doesn’t always protect your assets when there have been children in the marriage.
These conversations aren’t very romantic, but they are necessary, given how spouses change once a divorce happens.
Further reading
- Financial education: 5 reasons to have an emergency fund
- The best question for measuring the health of your personal finances
- 11 reflections on money that will change the way you see it
- 34 money lessons everyone should know
Featured image: Jenifer Corrêa, CC BY 2.0, via Flickr.
