Ideas & Advice

Should you open a joint account with your fiance? How this financial writer did it

"We decided to go for the last option: create a joint account for household use and have our separate individual accounts to manage. Here’s why."
 

“What’s yours is mine” or “what’s mine is mine”?

How should a couple handle their money?

Before hitting the next milestone, engaged couples need to set the groundwork for co-managing finances, especially as money arguments are considered the number one reason for divorce,

My partner and I spoke to a couple of friends about how they do it, and their answers were surprisingly diverse. Some examples include:

  • Sharing and managing everything in one joint account
  • Keeping completely separate accounts
  • One person controlling all finances and paying a monthly allowance to the other
  • Keeping a joint account but keeping some finances separate

We decided to go for the last option: create a joint account for household use and have our separate individual accounts to manage. Here’s why.

Pros of a joint account

  • For the little decisions

For big-ticket items, like furniture or weddings, it’s easy for us to take turns to take on the expense. However, living together also comes with incremental costs, like utensils, toilet paper, or lightbulbs.

Instead of deciding who buys what for each little item, a joint fund can simplify the process.

  • Overhead costs

A joint account is also great for overhead costs, as it splits the accountability of shared expenses equally. For example, if I pay the monthly electricity bill, I would have a stronger opinion about aircon use. With a joint account, we share the cost of our actions together.

This also sets the precedent that all purchases made in this account should be accounted for.

  • Saving together

Getting married means working towards the same goals together. For example, we’ve always wanted to take a trip to Iceland, and a joint account can act like a piggy bank that we regularly pitch into to work towards that goal. Choosing a high-interest joint account like DBS Multiplier Account or the Citibank MaxiGain Savings Account could help you get to that goal faster.

See also: THE CLIMBING COSTS OF GETTING MARRIED IN SINGAPORE

Cons of a joint account

However, a joint account can open up a new can of worms. The beauty of a joint account is that it gives two people equal access to the same pool of money, as well as transaction history of all expenses from that account. However, that opens all transaction history up for both parties to scrutinise. This could cause money arguments, which is fair for joint expenses like utilities and household expenses but tiring when it comes to personal expenses like meals.

And in the worst case scenario, if we fall out (touch wood), both of us have full autonomy to withdraw everything in the account.

Pros of separate accounts

Interdependent not codependent

I feel a special kind of pride that comes from spending your own hard-earned money, and I get more satisfaction spending my own income than getting an allowance from my partner. As two independent individuals, we also have a sense of ownership over the things we own. Because of this, we decided to keep our own personal accounts.

Our separated finances are a reflection of the interdependent relationship we aim to have. Psychologists claim that an interdependent couple, made up of two people capable of autonomy, have a greater capability of self-esteem and honesty. This is because they allow for their differences in their relationships. In personal finance, that could be their relationship to risk or spending habits.

While we undoubtedly will end up sharing items from time to time, retaining that divide between his things and mine helps us maintain the division between his life and mine.

Different utilities and risk appetite

Planning to manage our money well is one thing, executing it consistently is another. We each have our weaknesses and preferences. For example, my money weakness is spending excessively on food, while my partner has a weakness for shoes. Personal indulgences can give rise to arguments, especially when indulgences come from a pool of shared finances.

Economists use the term ‘utility’ to explain the value, or the satisfaction, that someone gets from a particular good or service. This value could differ from the actual price of the product since the satisfaction of owning the product will differ from person to person. My partner may perceive $300 utility in buying sneakers costing $200, while I only see $50. In which case, we will only come to a consensus if either the price of the shoes matches my lower utility or I agree to shoulder the loss of $150.

This could also go for investments. Making personal investments from your personal account means shouldering any potential loss yourself, and acknowledges that your partner may have a different risk appetite.

Adjust when necessary

Every relationship takes effort. While our conversation pre-marriage seems straight forward, it’s possible that this arrangement will require adjustment when we tackle new milestones together.

Adjusting into a single household account can be stressful when those habits are vast, and no pre-wedding conversation will truly prepare you for the difference in habits. So be prepared to learn more about your partner and continue to have conversations along the way.

See also: RECOUP YOUR WEDDING COSTS WITH THESE 12 HONG BAO TIPS


This article was first published in Singsaver Singapore.

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