Couples share a lot with each other.
But they shouldn’t share all their money in a joint bank account, says Suze Orman.
“I would never, ever have just one joint account, and that’s it. Never, ever, ever,” Orman recently told us during a NextAdvisor interview in celebration of Pride Month.
The personal finance icon and her wife KT, short for Kathy Travis, have been together for 20 years and have never opened a joint bank account. She says a single joint account with a spouse or partner could lead to power imbalances and a loss of independence in a relationship, especially if it turns sour.
Other experts agree. “In terms of joint bank accounts, I never recommend that everything be combined,” says Tori Dunlap, 27, founder of the financial education business Her First $100k. “You need your money, and you don’t want to think that money is the reason you’re staying in a relationship. It weirdly makes you more confident in your own relationship.”
Should You Get a Joint Account?
A joint bank account works the same way as a regular bank account, but more than one person has access to it. Every person listed on a joint account can deposit or withdraw funds from it, which can be convenient for paying shared bills.
A bank account, joint or not, doesn’t directly affect your credit. But keep in mind that the bank can send debt collection agencies to try and collect if you have any outstanding fees or a negative balance on the account, and that will stay on your credit report for up to seven years.
It can also be a testing ground to see how you blend your finances with another person. Married couples most commonly open joint accounts, but there are some situations in which long-term couples or business partners might decide to open a joint account.
Orman advises to add a joint account if that works for you and your partner or spouse, but to keep separate accounts as well. If you don’t have a separate account, you and your partner should have an open discussion about opening individual bank accounts.
“It depends on what you have coming into the relationship, but I would absolutely recommend that you have at least three accounts: one for you, one for your partner or spouse, and one joint account where you pay the joint expenses out of it,” says Orman.
How Couples Should Pay Their Bills
Following Orman’s advice, you can use the joint account to pay all your shared expenses and still keep the majority of your own hard-earned money separate.
But how much money should each person contribute to combined household expenses? Should bills be split down the middle in a relationship? Orman says no, and points to an easy equation that makes it fair to both partners.
Orman says your combined bills should be divvied up based on your incomes. Add up your and your partner’s take-home pay and see what percentage you each bring in to determine the amount each person should contribute toward combined expenses.
Let’s say you bring home $3,000 after taxes and your partner brings $2,000, equaling a total monthly household income of $5,000. Your income is around 60% of that sum, and their income is about 40% of that sum. So, if your joint expenses are $1,000 a month, you would contribute $600 and they would pay $400.
“I would have at least three accounts or two accounts, one of your own and one of the other’s,” says Orman, “and then you decide how you’re going to split bills.”