Are Separate Bank Accounts a Bad Idea in a Marriage?

In this edition of "Bank of Dad," our columnist goes deep on a pair of questions about shared bank accounts and financial intimacy.

by Daniel Kurt
Originally Published: 
An illustration of two dragons and one of them is protecting  treasure with gold
Geo Barnett for Fatherly

What’s the most amount of money one person in a marriage can spend without checking in with the other? I know there’s not a “rule” per se but is there an accepted amount? — Kieran L., Chicago

It sounds like you’re open to that discussion, which is terrific. The best way to head off arguments down the road is to share your concerns now and come to a mutual understanding. Financial intimacy is huge.

Talking about spending habits can be especially valuable for recently married couples, who are still getting a feel for what they can afford each month, says Forrest Baumhover, an advisor with Lawrence Financial Planning in Tampa, Florida. “It’s important to have a sense of what normal spending is like and have a discussion when something goes above that,” he says.

Ameriprise Financial released a survey a couple years ago that found the average spending limit that necessitated a conversation was $400. I had to admit I was a little surprised by that one. I know a lot of guys who would have trouble walking through the door with a $300 driver for their golf bag without meeting an icy stare on their arrival.

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This is an area where looking at rules of thumb may not be the way to go. A lot depends on your financial situation and spending habits, says Baumhover. If you have a fair amount of disposable income after meeting your savings goals, maybe the occasional splurge isn’t a big factor. For other couples, any non-essentials over $50 or $100 can raise eyebrows.

Try to agree on a number that’s right for your lifestyle. That means figuring out the dollar threshold where those purchases start to really make a real dent in your budget. Set the number too high and you’re at risk of over-spending as a couple; set it too low and it’s easy to start resenting each other’s oversight. Neither one is good for your relationship.

My wife wants to keep our accounts separate — even for investing. She tells me about her investments and I tell her about mine but our money is seen as distinct. Is this a terrible strategy? — Patrick, Paso Robles, California

Since retirement accounts like 401(k)s and IRAs can only be made in one person’s name, I’m assuming you’re talking about money in a fully-taxable account.

Baumhover says he’s generally not a fan of separate brokerage or mutual fund accounts, in part because it can imply a lack of transparency and trust. And if you want each other to be the beneficiary of the money anyway, the process of transferring ownership is more straightforward with a joint account.

But this is something of a moot point in California, which is one of nine community property states in the U.S. That means you have a claim to half of all the assets she acquires during your marriage – with a few exceptions – even if only one name is on the account.

She can still keep accounts that she opened before the marriage as separate property if she doesn’t co-mingle it with marital assets – for example, using your shared income to make trades. If that’s the case, it’s essential that she’s open about what those assets are and that she plans to keep them separate, says Baumhover.

Decisions like this can get extremely complex – especially if you move to a non-community property state or brought a prenup into the marriage – so running this by a local financial advisor or attorney is well worth your trouble.

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