As the wedding bells start to chime, many couples across the country are fixating on aspects such as the seating arrangement and the first dance song. Regrettably, financial planning doesn’t seem to receive the same level of scrutiny prior to matrimony. According to a survey, a significant 49% of couples do not discuss their financial management strategy before getting hitched. Only 41% divulge their earnings, and a mere 36% reveal their debt levels.
Failure to be upfront about finances can imply distrust, a potent threat to any relationship. Moreover, it can lead to shocking revelations – for instance, discovering that your partner’s credit score is a meager 530 – potentially derailing the dreams you once envisaged as starry-eyed lovers.
Upon merging lives, couples face the crucial decision: Should they combine their finances into joint accounts or maintain individual accounts?
The way couples handle finances is not merely about ensuring timely payment of bills. Money discussions can quickly become tense and often transform into indirect clashes over broader relationship aspects, such as power dynamics, career importance, and division of domestic tasks. Moreover, spending habits are a reflection of personal values. Disparities in this area could lead to questioning the compatibility within the relationship.
Engaging in clear conversations about money matters holds equal significance as other wedding-related discussions. This often includes pooling resources into a joint account or having a clearly defined plan in place, and an understanding on both sides.
The prime reason to consolidate finances is that shared accounts seem to foster marital bliss, consequently reducing the risk of a financially crippling divorce.
Research indicates that couples with shared accounts report higher happiness levels than those with separate accounts. However, as this connection was merely correlational, it wasn’t evident whether “happiness prompted joint accounts or joint accounts sparked happiness,” explained Scott Rick, a University of Michigan associate professor, who co-authored a groundbreaking study that established a causal relationship between shared accounts and happier marriages.
The study followed 230 newlywed couples over two years. Couples were divided into groups with mandated joint accounts, separate accounts, or free choice. Routine check-ins revealed that couples who chose separate accounts or exercised free choice (predominantly opting for separate accounts) experienced a standard decrease in relationship satisfaction post the honeymoon phase. In contrast, couples with joint accounts maintained their initial happiness levels, with a slight upward trend over time. Rick attributed this to the alignment of financial views through necessary conversations, minimizing score-keeping and fostering unity.
The pro-joint account argument is further strengthened by potential financial advantages. A single bank account can avoid minimum balance fees and qualify for superior customer rewards. Moreover, consolidated finances simplify bill management, future planning, and emergency handling. Additionally, joint accounts streamline estate planning, automatically transferring assets to the surviving spouse without necessitating extensive paperwork.
Also, shared finances can curb excessive spending, as the awareness of scrutiny may encourage restraint, Rick added.
However, separate accounts may prove more effective for certain couples. Many have managed to sustain happy marriages without merging finances. Separate accounts can maintain marital bliss without necessitating personality changes and prove especially beneficial for those with established financial habits, children from previous marriages, or highly appreciated assets.
Couples can also experiment with a middle ground approach, maintaining a joint account for household expenses while keeping separate accounts for personal expenditure. While shared accounts are superior to purely separate ones, a blend of the two could be ideal, provided the effort involved is manageable.