When couples merge their lives, they also have decide how to manage their money. Is it better to have joint or separate accounts?
Opinions abound on which money management system is less likely to result in financial fights. But a study slated to be published in the Journal of Consumer Psychology this summer found something interesting that swings in favor of a joint account.
Emily Garbinsky, an assistant professor of marketing at the University of Notre Dame, and Joe Gladstone, an assistant professor of consumer behavior at University College London, set out to answer this question: Does the type of bank account (joint versus separate) used by couples in committed relationships (married or living together) affect their spending choices?
It turns out, it does.
“Couple members are more likely to consider whether their partner will judge their purchase when spending from a joint (vs. a separate) bank account, because they feel a greater need to justify their purchase decision to their partner,” Garbinsky and Gladstone write in their paper, “The Consumption Consequences of Couples Pooling Finances.”
When a couple has a joint account, pleasure purchases are curtailed compared with those who have separate accounts, the researchers discovered.
“What we find in the bank transaction data is that, overall, people who spend money from a joint account compared to separate account spend less money on fun things, and they spend more money on functional things,” Garbinsky said in an interview.
In addition to analyzing bank transactions, Garbinsky and Gladstone conducted a number of lab studies to test their hypothesis. In one study, participants were told they had a budget of $75 and could buy clothing either for work or a social outing. As expected, participants spending from the joint account were more likely to choose the clothes for work than those spending from the separate account.
“When someone is spending from a joint account, they experience a greater need to justify or have a reason for their purchase that they can present to their partner,” Garbinsky said. “It’s much easier for us to justify spending on these utilitarian things or functional things for work than it is for us to justify spending on something purely for fun or for purely an indulgence.”
So what should couples take away from the findings?
“It is a good thing that you are thinking how your spending is going to affect not only yourself but also your partner,” Garbinsky said. “That is one of the undertones of this paper. I think couples often time have this notion that, ‘Well, my money is in a separate account and I can spend it however I want to. It’s my money.’ But that is not necessary true because every spending decision that you make, even if it’s from your separate account, ultimately has consequences for the total amount of money that you have available to spend as a couple. I think forcing people to think about how their financial decisions are going to make their partner feel is ultimately a good thing, considering that we know how much couples tend to fight about money.”
The Federal Reserve’s 2016 Survey of Consumer Finances found that 80 percent of married couples have a joint checking account with their spouse; 16 percent only have individual accounts, while 4 percent do not have a checking account in their household.
I’m an advocate of joint accounts in a marriage. Although from my experience helping couples with their finances, having a joint account doesn’t always result in responsible spending choices by a spendthrift spouse. But at least with a joint account you’re more likely to know what’s going on.
If you’re in a committed relationship and you choose to have separate accounts, it’s still important to discuss money spent for fun and functional purchases.
Whether you decide to have joint or separate accounts, or a combination of the two, at the very least communication and transparency about your spending is vital.
Color of Money question of the week
What’s worked best for your relationship: joint or separate bank accounts? Send your comments to firstname.lastname@example.org. Please include your name, city and state. In the subject line, put “Love and Money.”
Love and money live chat
I’m live at noon (ET) today to take your personal finance questions.
This week’s discussion will focus on love and money. Joining me to answer your love and money questions will be Susan and Michael Beacham, authors of this month’s Color of Money Book Club pick, the “Official Money Guide for Couples.”
The Beachams have been married for 30 years. They worked in financial services, and they took their experience and founded Money Savvy Generation, a financial-education company.
Read my review: Talk is not cheap when it comes to love and money
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Color of Money columns this week
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