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Continuing with my theme of how couple should manage their money together, my topic today is how many bank accounts a pair of people in a relationship should have. After "How should we share expenses?", which i wrote about yesterday, it's the next most common question I see in financial advice columns and blogs. And the two questions are related. How you set up your bank accounts is closely tied to how you share money and split expenses.
When Hawk and started living together years ago the modern advice was to have 3 bank accounts: one for each person in their name alone, and one joint account from which shared bills can paid. The idea was this preserved each partner's independence, via money and fiscal control that was theirs alone, while also making it simple to share common expenses. That was different from the more traditional arrangement, where couples once married would have a single household bank account. Often the woman in the relationship would have little control over the money.
As an aside, I can only shake my head at how the 3-accounts strategy that was the new advice 25-30 years ago still seems to be the new advice today. So many questions or stories on this topic in financial advice blogs are from women who are trying to avoid, or recover from, loss of financial control.
Anyway, back to what worked for us.
Why no shared account? Frankly because bank accounts are not free. Even the credit union I belonged to had a monthly account fee that was only waived if you had either direct deposit of your paychecks or a certain minimum account balance— a minimum that was high for people just getting started out. Having a third account would've meant paying fees. Evening it up ourselves once a month, even in the old days of adding stuff up on calculators and then writing a check, was easier than paying a fee. BTW if we were starting out today we'd do the same thing— though with a tool like Venmo or Zelle to even out the payments.
We opened the second trio of accounts specifically as savings accounts, separate from our checking accounts. In terms of discipline, checking accounts are for regular expenses. We auto-deposit our paychecks and pay bills there. Savings accounts we only touch for bills if they're major, planned purchases. More importantly, in terms of financial structure, the savings accounts are high yield. We hold them at banks that pay great interest rates. Most banks and even most credit unions pay essentially 0% interest on checking account balances. The best high-yield accounts are paying close to 3% today.
When Hawk and started living together years ago the modern advice was to have 3 bank accounts: one for each person in their name alone, and one joint account from which shared bills can paid. The idea was this preserved each partner's independence, via money and fiscal control that was theirs alone, while also making it simple to share common expenses. That was different from the more traditional arrangement, where couples once married would have a single household bank account. Often the woman in the relationship would have little control over the money.
As an aside, I can only shake my head at how the 3-accounts strategy that was the new advice 25-30 years ago still seems to be the new advice today. So many questions or stories on this topic in financial advice blogs are from women who are trying to avoid, or recover from, loss of financial control.
Anyway, back to what worked for us.
3 Accounts, in Spirit if not in Practice
When we moved in together we embraced 3 accounts idea... in spirit. We each had our own accounts but no shared account. One of the other of us would pay each bill for shared expenses (rent, utilities, food) then about once a month we'd figure out the difference and one person would write the other a check to even it out.Why no shared account? Frankly because bank accounts are not free. Even the credit union I belonged to had a monthly account fee that was only waived if you had either direct deposit of your paychecks or a certain minimum account balance— a minimum that was high for people just getting started out. Having a third account would've meant paying fees. Evening it up ourselves once a month, even in the old days of adding stuff up on calculators and then writing a check, was easier than paying a fee. BTW if we were starting out today we'd do the same thing— though with a tool like Venmo or Zelle to even out the payments.
If 3 is Good, 6 is Better!
As we built up our finances we did open a third account... once we had enough money to meet the minimums across multiple accounts. And then we opened a fourth account, and a fifth, and more!We opened the second trio of accounts specifically as savings accounts, separate from our checking accounts. In terms of discipline, checking accounts are for regular expenses. We auto-deposit our paychecks and pay bills there. Savings accounts we only touch for bills if they're major, planned purchases. More importantly, in terms of financial structure, the savings accounts are high yield. We hold them at banks that pay great interest rates. Most banks and even most credit unions pay essentially 0% interest on checking account balances. The best high-yield accounts are paying close to 3% today.
Advice You Can Bank On
My advice to people starting out (or starting over) today is three simple recommendations:- If you're in a long term relationship, use the 3-accounts approach— in spirit (like we did for several years) if not in practice.
- If you're living mostly paycheck-to-paycheck, focus on finding a good checking account with as low fees as possible.
- Once you're able to start saving, open a high-yield savings account and start transferring there whatever money you don't need for regular expenses. (Note this isn't investing. Investing is the next step, and it's a major one.)
