AccountConsumersBank power of attorney

Love and money: working together to manage your finances

Kathleen Altmann

Couples who live together or get married usually also plan to manage their daily finances and pay their bills together. However, it’s not always easy for couples to decide whether to set up joint or separate accounts. After all, there are many things to consider when making this decision. For example, what is the best way to split costs if one partner earns more than the other? And it’s hard to overstate the importance of determining whether both members of the couple have similar or different views when it comes to saving and spending money. Whatever the answers to these questions are, deciding whether to have joint or separate accounts is a personal decision; there is no ‘right’ way to do it.

Separate accounts: more autonomy, but more effort

Deciding to manage finances by continuing to hold separate individual bank accounts might create more work for a couple. It could mean calculating the split for a large number of joint payments, including rent, groceries and insurance and then sending money back and forth to ensure each person has paid their fair share. This can quickly become complicated, particularly when sending money from one account to the other. It also requires a lot of coordination on a day-to-day basis. Of course, keeping separate bank accounts as a couple also means that each partner continues to have full, autonomous control over their own finances. 

This may seem advantageous, but it is also very important to take precautions that allow your partner to act on your behalf in an emergency. After all, if for some reason one member of the couple is rendered incapable of accessing their account, there is no way for the other member of the couple to do so unless plans have been put in place. To protect against such an emergency, both members of the couple should consider granting the other power of attorney for any bank and securities accounts. Every bank has application forms that allow its customers to organise a power of attorney.

A single shared account: the joint account

Opening a joint account is the perfect solution for couples who plan to manage their finances together. There are two types of joint accounts available, the ‘both to sign’ and the ‘either to sign’ account. 

For daily life, a ‘both to sign’ account, meaning that account holders may only withdraw money or make changes together, is somewhat impractical. If one member of the couple wants to access the account, the other must give permission. 

The biggest advantage of an ‘either to sign’ account is that both partners can access the account independently. The couple only needs to act together in the event that they wish to borrow money or engage in forward transactions using the funds in the ‘either to sign’ account. 

This makes it easy to handle finances in daily life, while also keeping the need to consult with one another to a minimum. Of course, there has to be a great deal of trust in the partnership in order to open an ‘either to sign’ account. This is particularly the case if the couple have different ideas about spending, leading to a big discrepancy in their consumption habits, which can be a source of conflict in the relationship.

It’s important to note that if a joint account – regardless of whether it is a ‘both to sign’ or ‘either to sign’ account – goes into overdraft, the bank can demand that each individual account holder repay the full debt. Legally, it makes no difference which agreements the couple has come to in regards to the account – both are fully responsible for the overdraft.

Three accounts: two individual and one joint account

Couples can also decide to split the difference, by simply adding an ‘either to sign’ joint account to their individual bank accounts. The question as to who will pay for what in a couple’s life together is of course highly individual, but couples should take care to discuss and clearly define their terms. In order to determine the ‘optimal’ amount of money that each member of the couple will pay into the joint account, it makes sense to spend a set amount of time determining what the couple’s daily expenses look like. A ledger is a great way to do this; there are digital ledgers available in the form of apps, or the couple could choose to go the traditional route and use a book, pen and paper. It can also help to keep an eye on bank statements. How much money is withdrawn each month for rent, groceries and insurance? What daily expenses are the same for both partners? Do the couple have children, so that the costs for childcare, afterschool care or extracurriculars will come out of the joint account, or are there other joint expenses, such as loans? 

Once the couple has determined what their joint expenses are, and as part of that have clarified whether future payments for, as an example, holidays or joint purchases will come from their joint account, they can estimate how much money they each need to pay into the joint account. How exactly the couple decides to split their expenses is an individual decision, something they must decide amongst themselves.

Another way for this particular model to work is that each member of the couple pays their entire earnings into the joint account. Then, they each transfer a lower but identical amount of money from the joint account into their individual accounts. The money in the individual accounts can be used as they wish. This model works particularly well for couples who need to consult with each other more frequently when spending money, because the individuals within the couple have very different values when it comes to spending habits. It helps to reduce conflicts to a minimum.

Just in case: provisions for separation or death

The idea of separation, or, perish the thought, the death of a partner is the last thing on a couple’s minds when they are basking in the glow of having found one another. However, it is important to realise that if a person dies, it is their heirs that then have a right to access the account. Of course, if the account is an ‘either to sign’ account, then the surviving account holder can close the account without any heirs interfering. In the event that one of the account holders refuses to close an ‘either to sign’ account after a separation, the other account holder can at least use the option of cancelling the ‘either to sign’ mandate with the bank, so that in the future the ‘either to sign’ account is de facto transformed into a ‘both to sign’ account. At that point, both parties must agree to any transactions made with the account.