Joint Checking Accounts
Conquering Money Madness
When Peter Q. went out and bought a sleek, new, red Porsche a few years ago, his live-in girlfriend of three years thought he was being silly, but she didn't harbor any feelings of resentment.
"I never had to give anything up for him to have that car," Gina A. reasons. "We decided from the very beginning that we didn't want to manage each other's money."
Like many couples these days, Peter and Gina have combined households, but not incomes. They share a home with Gina's 15-year-old daughter from her first marriage. Both Gina and Peter make a 50-50 contribution to a household account, out of which bills are paid, but they continue to maintain separate accounts for themselves. Gina says it is an arrangement that works well.
"I guess what it comes down to is that we wanted to keep money out of the relationship," she muses. "I had a lot of expenses (coming into the relationship) that he didn't have; he had a lot of debts that I didn't have. For the most part, it's worked well."
Financial planners are split on the question of whether couples -- married or cohabitating -- should have three accounts.
Experts Divided on Three-Account Strategy
"Money translates into a question of power, so it's not only a question of the dollars and cents and where they're going, it's also, 'Do I have to tell you about every cent I spend?'" says Elizabeth Razzi, who writes the couples finance column for Kiplinger's Personal Finance magazine. Razzi says the option of three accounts may be an excellent way for couples to avoid conflict over money, but notes the obvious drawbacks: three minimum balances to maintain, three potentials for fees. One alternative is a joint account with a built-in personal allowance for each person.
Gary Foreman, former financial planner and editor of the personal finance website, Stretcher.com, believes many couples would be better off focusing on the "we" not "me" concerns of money management. He warns of pitfalls in the practice of divvying up the bills, where one spouse pays the utilities and the other pays the mortgage.
"If I'm the person paying the electric bill, then the other person asks, 'Does the air conditioning really have to be that low?' observes Foreman. "The best way to pay bills is with a joint account, where the bills are viewed as a joint responsibility. 'It's not your bill or my bill, it's our bill.'"
After Kids: Money Makeover
The "it's our bill" approach has evolved for Anne and David B., parents of 2, married nearly 20 years.
"We used to have a joint account for household expenses before the kids came, where I paid 45 percent of the bills based on my income and he paid 55 percent," remembers Anne. "It seems funny now, because now everything of mine is his and everything of his is mine. It's all shared. He would never resent me for having a pedicure."
The couple doesn't budget discretionary funds, something financial planners recommend, simply because of time constraints. Still, they have developed an informal rule that seems to work well: Any purchase over $100 needs to be discussed in advance.
"My brother-in-law once went out and bought a $2,000 computer when his wife was away for the weekend," Anne recalls. "I know what I'd say if David did that. 'It's going back!'"
Without a doubt, a couple's financial strategies change with the arrival of children. Gina chooses to send her daughter to parochial school, and relishes the financial independence that allowed her to make a unilateral decision on her daughter's education. In families where money is pooled, the primary caregiver, often the mother, ends up spending more in discretionary funds for things children want or need: new sneakers, school supplies, a trip to the video arcade. Both Razz and Foreman warn that resentments can fester unless couples establish some form of accountability. One solution is to budget out-of-pocket expenses, based on a monthly average.
"Budgeting gets such a bad reputation; it sounds like dieting and no one wants to do it," laughs Razzi. "But if you build discretionary funds into the budget, then you have 25 bucks or 500 bucks that is free. If we put it down in black and white on paper, it forces us to make choices, rather than watch the money just go out the door."
Whether joint accounts or separate accounts make sense for a family, setting financial goals is an essential first step, experts agree. Couples need to determine: How many of our financial goals are shared? How many are individual? Do both Mom and Dad agree that saving for kitchen remodeling is a top priority? Does Dad hope to buy a new set of golf clubs within three months, while Mom hopes to budget for a weekend away with her best friend? The good news is that goal setting can be done as a family, so that children can learn lessons about what needs to be paid for, what everyone hopes to have, and the difference between the two.
"Let's say a family decides that their goal is a week's vacation at Disney World in three years," suggests Razzi. "You can get the whole family involved, maybe by forgoing The Disney Channel to put a little toward the goal! It's a great way to show kids how money grows."
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