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Four ways for organising family finances

Money matters in the realm of shared life! It is very likely that couples and families experience financial problems at one or other point during their life together.  It is not surprising that having financial problems is the fourth most common reason for divorce shortly following infidelity, communication breakdown and physical and emotional violence. How couples organise their financial relationship is therefore not a trivial matter.  I have discussed this with many of my friends and acquaintances and it seems that there are four main options.

Complete unity of funds

In this case the couple has one current bank account and all income and expenditure go through it.  In such cases it is also usual to have joint savings and investment accounts, as well as joint property deeds and mortgages. This kind of money organisation builds upon considerable level of trust and deep acceptance of common and shared life. It can go wrong if trust in any area is broken. This organisation of family finances also needs to meet two conditions: open and regular discussion and agreement on matters of finance; and shared responsibility for the financial future of the unit.

One account with satellites

This is an option where all income and shared expenditure go through a joint current bank account but a proportion of the total income is transferred to individual accounts. The members of the couple have complete discretion over their parts of the income and can choose how and on what to spend it; save it or invest it. This option requires sufficiently high income and considerable financial literacy to organise and maintain. Once this has been enacted and the proportions set, however, it is likely to run smoothly since negotiations and money discussions are likely to be necessary only very infrequently.

 Separate accounts with a link

In this case income goes to separate current accounts but the couple has also a joint account where a certain proportion or a set sum is transferred to cover shared expenditure. This arrangement appears very similar to the previous one but in fact there are some important differences. One difference is that it potentially allows much higher level of secrecy regarding income and personal expenditure. In other words, partners are not necessarily aware of the financial situation of the other. Whilst this may be seen as a downside it also means that discussions about money are relatively infrequent thus leaving less space for discord.

Complete separation

This option means that spouses have, or believe they have, completely separate finances where they have separate bank accounts and agreements which expenses will be met by whom. This may appear an attractive arrangement at first but it has many problems. Shared life is difficult to finance separately – although there are many expenses that can be divided there are many joint activities where this is not as straight forward. What happens if the income of the two parties is dramatically different? Do they eat different things? Go on separate holidays? Stay in different hotels when they go on holiday? What happens when children arrive and there is temporary or long term loss of income and/or childcare fees?

Each of these arrangements has advantages and disadvantages and it seems to me that the choices we make would depend on trust, commitment and previous experience. I for one, will go with the first or second option anytime; currently we are firmly in the first option. These need much discussion, negotiation and agreement about the financial affairs of the unit but they also mean that there is trust, openness, communication and common purpose.

Which is the option you prefer?

2 thoughts on “Four ways for organising family finances”

  1. Given that one in three marriages ends in divorce, it would seem that trust is frequently broken. One partner can empty the joint bank account and run up bills on joint/secondary credit cards and the other partner is powerless to stop them. I’ve seen it happen. The bank will do nothing as the account is joint. I’ve known a credit card company refuse to close an account where a couple have split, until both parties handed in their cards. One party went on spending to spite the other.

    Err on the side of caution and have your own bank accounts and your own credit cards and have a joint fund for household finances. If trust is there in the first place this will not crush it. Finances can still be discussed and an appropriate amount put in the joint bank account. Each party is left feeling that they are still in charge of their own finances. If the worst happens at least both parties have an account they can still use.

    • Charis, good to hear. I can see the point you are making – I know somebody who had thir joint account frozen when separating, so could not get any money out (given substantial contribution to the account). I suppose as with many other things it is a precarious balance between trust and openness, and a level of independence.


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