Why married couples should have separate bank accounts

Sam Dogen, Financial Samurai
Sam Dogen, Financial Samurai
Nicolas Asfouri | Getty Images.

This post first appeared on Financial Samurai.

If you plan to get married, then you better plan not to get divorced. Otherwise, what’s the point? You’ll end up wasting money on lawyers. You’ll absolutely disrupt your finances. And if you have kids, they might have to go to therapy in order to make better sense of the cruel realities of the world.

According to a 2013 Kansas State University study of more than 4,500 couples, it found that arguments about money was by far the top predictor of divorce.

According to a creditcards.com report, approximately 7.2 million Americans (4.4 million men and 2.8 million women) have hidden a bank or credit card account that their live-in spouse or partner doesn’t know about.

What’s going on? For one, if you are constantly feeling financially constrained, there’s no surprise that your relationship will suffer. Therefore, making enough money to live a comfortable lifestyle is important. Then getting 100% on the same page when it comes to spending and reaching financial targets is the obvious next step.

But even rich people go through breakups all the time. So clearly there’s something else going on after a couple starts earning a comfortable income as the hidden bank and credit card accounts survey indicates.

Welcome to the terrible world of financial dependence, where no matter how much your household earns, you’ll never feel free if you aren’t earning your own income. 

Why Every Spouse Should Have Their Own Bank Account

One of the best gifts you can give your spouse is the gift of financial independence. I’m not talking about showering your spouse with riches once you get married. I’m talking about supporting your spouse in making his or her own fortune in addition to contributing to the family fortune.

After all, financial independence by definition includes being financially independent from each other. Many of us remember the sheepish feeling of having to ask our parents for money growing up. The same feeling still exists as an adult without your own bank account.

Over the years, I’ve had over a hundred spouses tell me how they wish they had their own money to spend freely without fear of judgement from their spouses. Let me share three specific examples.

Husband of an heiress who lives in a mega mansion.

“Sam, the reason why I spend so much time trying to become a published author is because I want to make my own mark. Right now, I’m seen by strangers as just some chump who married into money. No matter how much I tell people I married for love, nobody will fully believe me. I want my own identity. I want to eat what I kill. I want to have the freedom to buy what I want without drawing from a pool of money my father-in law left us when he died. I don’t deserve it. Never in my wildest dreams would I have imagined a poor kid raised by a single mother would one day be asked to host political fundraisers at his home. I need to right the scale. “

Business school classmate who married a Google engineer back in 2007. 

“We live a comfortable life down in Menlo Park. Google’s stock is up more than 4X since we graduated back in 2006 and we feel financially secure. It’s wonderful being a full-time mother of two, but it’s exhausting as you’re now finding out. I had a great 10-year career working as a chemical engineer until we decided it was best for me to stay home. He made more and the family benefits at Google are amazing. But ever since I decided to be a SAHM in 2012, I miss the feeling of being able to make my own money and spend money on silly things without having to explain myself to my hubby.

Although we are a team, I’m always second guessing whether I should spend on even the simplest of indulgences. For example, when my back and hands were starting to kill me from having to rock my youngest to sleep for an hour each evening, all I wanted was to get an hour long massage. But instead of charging $120 on our joint credit card where he checks each line item, I decided to just spend $20 in cash on a chair massage at the mall because I was afraid he’d complain that he could easily give me a massage for free! I love my husband’s frugal ways, but his massages don’t come close to what professional hands can do.”

A reader shared one of the reasons why she got a divorce.

“We never made a lot of money, around $85,000 combined, or so I thought. He liked to handle the finances so I just let him do his thing. Then one day I found a pile of ATM withdrawal receipts stuffed in his coat pocket that totaled about $8,000 over the past three months. When I confronted him about the receipts, he admitted he had a separate account used for playing poker. He didn’t want me to worry, explaining to me poker was just a fun outlet.

It turns out he was actually a great poker player and had over $50,000 in the account! I was pretty proud of his success in the beginning, but then I realized he wasn’t always going to play poker during the nights he said he was. I won’t get into the details, but I strongly believe that if your partner isn’t completely honest with you about money, he’s probably hiding something else as well.”

Reason #1: The Release Valve

The common reason for each spouse wanting their own bank account is the desire for independence as all three examples demonstrate. There’s no greater feeling than being free to do whatever you want with your own money. Because it is impossible to 100% agree on every single aspect in life, having your own bank account provides a release valve when partners don’t completely see eye-to-eye on a particular expense so that pressure doesn’t build up to the point of explosion.

In the massage example, the husband couldn’t fully empathize why his wife would want to spend $120 + tip on a massage he thought he could provide for free. And because his wife doesn’t have a salary, she felt guilty spending $100 more than what she could get for a 25-minute chair massage at the mall.

Over time, resentment builds up by the wife, especially since taking care of two young children is way harder than going to work at Google for 10 hours a day. The husband, on the other hand, might disagree with her assessment and may begin to resent her for thinking this way given he’s purposefully shielded her from all the corporate BS he’s had to deal with.

Without a release valve, the chance for arguments and ultimately divorce increases.

Reason #2: The Insurance Policy

Having independence is just one reason why each spouse should have their own separate bank account. After all, before each partner met, each enjoyed independence for years. The other reason for having your own financial account is insurance.

Let’s say something bad were to happen to you and the legal system somehow ties up your assets in probate despite a clearly written will. Or perhaps your life insurance company decides not to pay out the claim you spent 15 years paying. Who knows what snafus await after an unfortunate event. They happen all the time.

If you have your own finances, you can more comfortably wait out the storm while the legal system makes you whole. In other words, your bank account is your worst case scenario. Knowing that my wife has her own healthy bank account let’s me die more peacefully knowing that at the very least, she’ll do just fine without me and our accumulated wealth and vice versa.

Notice how I didn’t write about insurance from divorce. I’m 100% focused on the marriage vs other powers that may make life difficult. Marriage is about security, and having a separate bank account provides that extra security.

Reason #3: The Financial Trainer

Just like how a workout buddy helps motivate you to do one more set or eat one less slice of pizza, your spouse can help motivate you to earn and save more as well.

By having separate financial accounts, you can clearly see where each of your finances stand. You can challenge each other to see who gets to a certain savings amount first. Or if your starting amounts are vastly different, you can challenge each other based on a percentage increase amount. The number of different challenges and the ways to get there are endless e.g. the many different types of side hustles and investments one can undertake to boost their income.

The ultimate goal is to push each other to achieve optimal finance performance while concurrently building a stronger financial life together. If you completely co-mingle your funds, it’s hard to tell exactly how much you’ve contributed to the household. The more murky your contribution, the easier it is to feel demotivated or be misinformed by how much you’ve contributed.

Keeping separate bank accounts also minimizes the temptation of “cheating” by overly relying on your spouse. Don’t take away your spouse’s sense of pride and accomplishment like the man in example #1.

The Horrors Of Having Separate Bank Accounts

I know by now a lot of you are completely befuddled with the idea of giving each spouse the gift of financial independence. I don’t blame you since for so long, the tradition has been for the husband to earn and the wife to stay at home. But it’s the year 2017 folks, modern up!

Believe in equality between men and women. Every little girl and boy growing up today should believe they can have a fantastic career and be financially independent on their own. If you had or have a little one, what would you encourage him or her to do?

If you are financially independent, you can weather a breakup much easier. Don’t think divorce won’t ever happen to you since the statistics prove otherwise. If you are financially dependent on a person you no longer love, life won’t be easy.

But to recognize the other side, here are some aghast comments from my post, How To Overcome Money Addiction, when I wrote, “I borrowed $10,000 from my wife” to invest in an Austin, Texas real estate crowdfunding deal.

Aghast comment #1

“I will state flat out that I think everything should be shared and that I am a bit alarmed that you ‘borrowed $ from your wife’ although I don’t know your situation, I just want you to succeed, marriage and all, especially with all the baby talk on this blog as of late.”

Aghast comment #2

I hope you don’t take offense, as I have never looked into any surveys or studies on the subject, but I know several people whose marriages have ended and many of them kept separate accounts. It just seems like (to me) the two becoming one should mean everything!”

Aghast comment #3

“My wife and my finances are completely merged, so the concept of borrowing money from her is ridiculous!”

I have no problem with couples 100% mixing their finances together. I’m not sure why it always seems like couples who only have joint acccounts have problems with those who don’t. But let me explain anyway why I used the term “borrowed.”

Since we first met, I’ve always wanted to give my wife everything I could conceivably offer. From paying off her college loans after my third year of work, to buying a house in San Francisco for both of us to live a more comfortable life while young, I’ve always had a desire to provide. Some might say these actions are the result of true love.

I owe her a lot because she has been with me since the beginning when we were broke college students. During my senior year while I was interviewing for jobs in NYC, she’d wake up at 5:30 a.m. just so she could call and make sure I wouldn’t oversleep for a 7 a.m. interview. We have a special relationship because money was never a deciding factor for why we came together. Further, I never want money to ever aversely affect our relationship.

I’m proud to say that she has never needed financial help from me. She enjoyed a fantastic 13 year career and was able to negotiate a severance in 2014 with some coaching by yours truly. She continued to work for two years after I negotiated my severance, even though she didn’t have to because she felt a great sense of accomplishment being her own financially independent woman. But after two years, I was too bored at home and wanted to spend more time with my best friend.

Because I care for her so much, I felt bad during my cash crunch to ask her for money to cover my investing addiction. I know we are life partners and share everything, but I just hate asking anybody for any money, especially someone I love the most. Conversely, it’s easy to borrow money from a bank because you don’t nearly have the same relationship with an amorphous institution as you do your spouse. Hence, I borrowed the money and gave it back a couple weeks later.

We have separate bank accounts along with a joint bank account to provide maximum flexibility. We loved encouraging each other to save aggressively while we were both working. Now as business partners, we share profits evenly and always remind each other to mobilize our capital each month. We talk about all large financial decisions like buying a car or a house before doing anything, and for everything else, it doesn’t matter. 

Whoever happens to have more cash in their wallet, pays. Whoever gets served the check, pays. Whoever wants to feel more of the provider that day, even though it’s one team, pays. The small stuff does not matter, and that is a beautiful thing in a relationship!

The Stay At Home Spouse

So far I’ve addressed separate financial accounts between two working spouses. But how does a stay at home spouse expect to earn his or her own money if he or she doesn’t have a job? Well that’s easy. Being a stay at home parent is easily worth the median income of your city. And if you don’t believe so, then take the number of hours your stay at home spouse works and multiply it by the average hourly cost for daycare or a nanny. That is the amount of money he or she deserves to make.

Now take that monthly salary and subtract it from the day job working spouse’s salary, and that figure should be his or her income which can be spent however he or she chooses. Of course, it’s a good idea not to spend it all. The money should be allocated similarly to the way the day job working spouse’s money is allocated in terms of savings, investing, spending, and so forth. And of course, you don’t have to give a salary/allowance. You can just agree to earmark this money in a joint account as his/her right to spend at will.

If you believe in happiness, then you believe in financial independence for both spouses. And if you believe in financial independence, then you should not be opposed to each spouse having a separate bank account along with contributing to a joint account. The ultimate goal is to create household wealth together, while also ensuring each spouse never loses his or her freedom. Giving financial independence is a gift of love.

More from Sam Dogen:

Why one couple feels like they’re scraping by on $500K a year

The fear of running out of money in retirement is overblown 

The dark side of early retirement

Sam Dogen is the founder of FinancialSamurai.com, a leading personal finance site established in 2009 that teaches people how to achieve financial freedom sooner, rather than later.