It might not seem as pressing a question as when to meet the parents or start a family, but deciding to move your money together can have a big impact on future wealth. Couples who combine bank, credit card and investment accounts are happier in the long run and find that pooling resources helps pave the way for traditional financial milestones such as buying a home and savings for retirement, studies show.
Married couples hold four times more wealth than unmarried couples who live together, and researchers point to combining finances as one of the reasons.
So why aren’t more couples joining finance?
By one measure, 43% of couples said they only had joint bank accounts, according to a 2022 survey from CreditCards.com. Thirty-four percent of couples in the same survey have a mix of joint and separate accounts, and 23% keep their finances entirely separate.
The choice often comes down to how people weigh the risks and rewards. If a couple separates or divorces, joint finances may be more difficult to sort out, and one person’s hard-earned money may be lost in the ensuing dissolution of what is considered “yours” versus to “their”.
Merging accounts has some benefits, according to research by Emily Garbinsky, an associate professor of marketing and behavioral science at Cornell University, and Joe Gladstone, an assistant professor of marketing who studies consumer decisions at the University. from Colorado to Boulder. Their research shows that couples who share money also show higher relationship satisfaction. In addition to the benefits of having access to a larger pool of assets, combining finances leads to a greater sense of responsibility, since each half of the couple can observe more closely the spending and saving habits of the couple. other, they found.
In numerous studies, Professors Garbinsky and Gladstone have examined how the financial decisions of individual partners change depending on whether they spend from their separate or joint accounts shared with a partner. They found that those who spent from a joint account were less likely to make “hedonic” purchases and instead fell back on more “utilitarian” options. In one study, for example, participants spending on a joint account more often chose to buy a coffee mug – perceived as a more sensible purchase – rather than a beer mug, which was considered the less expensive option. within reason.
Research has shown that greater responsibility does not mean greater conflict, Professor Gladstone said. “Maybe in some way the more we can increase that transparency and awareness of everyone’s behavior, it could keep everyone more coordinated and on track,” he said.
Not all couples are ready to take the financial leap.
Nathan Gallagher, a 30-year-old waiter and bartender living in Brooklyn, doesn’t yet share a bank account with his partner. But each month, the two sit down to talk about their respective accounts, shared expenses and the financial progress they’re making together as a couple. They share the rent and other household bills, and if one of them needs funds during a lean period, the other partner does not hesitate to step in and help cover the costs, has said Mr. Gallagher.
“We’re really ok with taking things at our own pace, but by combining the finances, I can see we’re taking a step into the future,” he said.
For Jesse Cramer, relationship manager at Cobblestone Capital Advisors in Rochester, NY, Gallagher’s approach speaks to the range of ways young couples choose to combine their finances.
“On the one hand, you have finances so separate that it’s like two strangers, from a financial point of view, and when one of them takes dinner, the other Venmos takes them for half” , Mr. Cramer said. And on the opposite side are couples who share everything.
There is also a middle way to take, and Mr. Cramer says that is his approach. While he plans to one day join finance with his wife, whom he just married in September, they have not yet opened a joint account. Still, the two have already had important conversations about shared financial goals. They agree to discuss when they will share the costs and when it makes sense to separate purchases.
When it comes to sharing money with a partner, Mr Gallagher said he believes it really comes down to an individual’s personal goals and their own risk tolerance. Weighing what you gain versus what you lose is a very personal calculation, he said.
“A lot of people have trauma related to the money they bring into their relationships,” he said. “The way money and relationships interact is based on people’s personal history with money.”
But the benefit of combining finances could outweigh these risks, especially for those with less wealth, Prof Gladstone said.
“If you have a lower income and then you band together, that might seem like a lot more money, whereas if you have two very well-off people and you band together, you’re still very rich,” the professor said. Garbinsky.
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