Should You Combine Finances?

It’s a big day! You just moved in with your boo and you’re totally rocking this living-together thing. But then comes the first rent bill and you’re stuck do we handle this? If you asked your grandparents how they handled finances back in their day, you might be met with some weird looks. After all, when they moved in together, they were most likely already hitched and it was just assumed that they’d immediately combine every aspect of their separate lives. The house, the Studebaker, Aunt Mildred’s antique tea set...everything became family property. Including the bank accounts. In 1960, 65% of children grew up in a household where the mother was a homemaker and the father was the breadwinner. Today, only 22% of children grow up that way. From a dramatic rise in women being the breadwinners to falling marriage rates the relational and economic landscape has changed dramatically.

These days, 25% of parents living with a child are unmarried and 35% of unmarried parents are cohabitating. So the question is: should you consolidate finances, and continue a time-honored tradition? Or is maintaining financial autonomy more important? When we asked you on Twitter, 79% of you said you combine all or some of your finances with your partner. And this tracks with national trends. But this is changing. Millenials that live together are now more likely to keep separate finances than any previous generation. And it turns out there are some pretty compelling advantages to keeping your finances separate as a couple. Americans with student loan debt carry an average of over $32,000. And the typical American is floating over $6,000 in credit card debts. With numbers like these, it’s easy to understand why one partner might feel guilty burdening the other with something that was “their problem”. Or perhaps you’ve been in or witnessed a financially abusive relationship in the past. Separate accounts can help protect you if serious problems arise. If you’ve ever known somebody that suffered from a gambling or substance addiction, you know first hand the financial devastation that can follow.

But let’s be real - the main reason people keep separate finances is to maintain their independence! In modern society, it’s completely normal to enter your 30’s without ever sharing your finances with anyone else. As your lives begin to merge, it’s understandable to feel protective about your autonomy. You’ve never had somebody telling you what you can and can’t buy before. Why start now? And if you don’t have to talk about it, you don’t have to fight about it, right? As attractive as it might be go “Lone Wolf”, there are some good reasons the majority of couples still combine finances. So let’s look at what the “Shared Approach” has going for it. When money is shared, you can work efficiently toward big goals like debt reduction.

Buying a home is easier when you have both of your incomes and credit histories available to work with. And if you plan on spending retirement together, pooling resources makes a lot of sense. Think about it: is one of you gonna spend your golden years in a nice condo and the other in the tool shed? Probably not. Shared finances can also protect you against unexpected pitfalls, like an injury or layoff. And if you enter a tight season by choice-- such as taking time off to start a family or navigate a career transition - anyone will tell you what a game changer it is for somebody to back you up financially. Shared cooperation and transparency can also result in a healthier, longer-lasting relationship. A 2018 study found that 20% of relationships that don’t share finances end because of money problems…compared to only 4% of relationships that do. And a series of five university studies found that couples who pool all their money are happier in their relationships and less likely to break up.

And don’t AT us with the correlation/causation argument. The researchers specifically noted that this wasn’t merely a correlation but that the “results demonstrate that method of account management can.. influence relationship quality.” So it’s pretty clear that how you handle money actually affects your relationship. There are also hybrid versions of the two. Like the “Proportional Earnings Approach” where each partner contributes the same percentage of their income into a joint account. Or “Bill Parsing”, where each person picks certain bills and expenses to pay for, then use Splitwise or Venmo to split large items like rent. Back to the big question: which is more important? The teamwork or autonomy? We here at Two Cents believe you can have BOTH if you work at it! For example, we got hitched young, while still in college.

Truthfully, there wasn’t much to pool, so we went the traditional path by default. But over the years, conflicts arose because neither of us had much spending independence. We hear this from couples all the time, and it can really start to build resentment over the years. So our solution was to “have it both ways”: we combined our finances, but we created individual, equally-funded envelopes of “fun-money” to spend or save however we saw fit. So I get guilt-free thrift store runs. And I don’t need permission to trick out my mountain bike. Boom! Each relationship is unique and there is ultimately no “one size fits all”. But if you have decided to share a future together and have healthy levels of trust we encourage you to use your finances as a way to work better as partners, while still protecting individual freedom and independence. And that’s our Two Cents! Thanks to our patrons for keeping Two Cents financially healthy. Click the link in the description to become a Two Cents patron! Do you share finances? Why or why not? Share it with us in the comments..

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