Personal Finance presentation, individual checking account versus joint checking account prepared to get financially fit by practicing personal finance.
00:14
The question as to whether it’s better to have a joint checking account or separate checking accounts is actually a highly contested question. One, which I don’t believe there’s an actual answer yes or no this or that answer to, and it’s going to be a personal question that will be dependent on the people that will be involved in the goals and values that they have. However, note that money is commonly cited as a problem within relationships, and one of the things that cause to breakups and so on.
00:41
And therefore, you want to make sure that whatever your goals are, that you’re listing out those goals and trying to put together your money, strategy in such a way that it’s in alignment with your particular goals. In doing research on this, I find that many times the responses that you’re going to get this would be typical, obviously, when you’re asking advice to someone, if you were to ask someone about this a couple for this, they’re gonna say, hey, look, this is what we do.
01:04
And this is what works for us. And that’s good advice to have. But note that that couple might be different than yourselves in terms of what your values are with regards to the money management. Also note that I’ve also heard an argument that I don’t think is completely valid. I don’t, I’ve haven’t seen any studies that kind of support it, I’d be interested to look at the studies. But that would be that you’re more committed to the relationship, if you say have a joint checking account, as opposed to separate checking accounts, because you’re commingling your money, which again, I think the commingling of your money can work quite well.
01:35
But I’m not sure that it’s going to be measuring the level of commitment. I mean, in the research that I’ve done, the people that I’ve worked with, I’ve seen both work, I’ve seen people that have had a joint checking account that have done quite well, I’ve seen people that have separate checking accounts that have done quite well, I’ve seen people that have had both types of checking accounts and have not done quite well. And it doesn’t seem to me that that factor is the driving is the driving factor.
01:58
In particular, I’d be interested to see some research on it, if there’s been research in terms of whether having a joint checking account leads to a longer lasting type of relationship, I would think that it would be dependent on you know, the people’s values that are involved, just what they’re comfortable with. And as long as you’re transparent, and you know, and committing or putting together your financial plans and resources, that that would be kind of the important factor.
02:22
So in any case, these are just some things to basically keep in mind, we’re going to go over the pros of the joint checking account, then we’ll go over the cons of the joint checking account, then we’ll look at the pros of the separate checking account and the cons, these are just some of them, some factors to consider. So one of the main factors, this is in the pros of the joint checking account is that it may work best if one partner enjoys managing the finances more than the other. Meaning, if you’re in a situation where one individual is a money managing type of person, they enjoy, you know, sorting the money and managing the money.
02:56
And the other person, if they’re not someone that really enjoys, that doesn’t mean they don’t have access to the money, and are not managing, of course other things in the relationship. But if they if they’re not someone that really enjoys the money management, which many people are not, then I think the one checking account works out, of course quite well.
03:14
Because Because then you have you know, the two people that can basically do what they’re good at doing right, the person that likes to manage the money can go ahead and manage the money, the other person can still be transparent in the money having the online checking, see all the transactions and so forth, but may not like the actual kind of management process of it.
03:31
And therefore the joint checking, I think works quite well. If you have two people that both have their own kind of systems, they’ve all they’ve always done their own money management, they kind of like just being in control of their own, at least portion of the of their money management system. And they especially if they have different kind of money management systems, they have different techniques to track their particular checking account and whatnot, then when you join them together,
03:55
I think you might have more of a more of a problem. Because obviously, when you have one checking account, then you can have you know, one system that’s going to have to basically be implemented. So you can come up with some kind of way to combine your systems together or so on and so forth, or decide whether or not it’s you’d rather just basically do your own, due your own checking account to some degree and come together at certain at certain components when you’re doing the planning into the future. But in any case, I think that’s one of the more one of the bigger kind of factors that are going to that are going to be involved.
04:26
It can be easy to plan and budget because resources are in one spot. Now obviously, when you’re doing the long term planning, it can be easier to do that kind of budgeting if you’re if your money’s coming out of, of one area. But again, there’s there could you might say, hey, look for my personal spending, I want to do my own kind of personal planning and budgeting for my own spending because I really only have control even when married, have my own behavior, right even within a relationship. I can I can, you know change my own behavior and whatnot.
04:56
So maybe you still like to have your own personal budget to keep track. Basically what you’re doing at least to some, to some degree, it might be easier. So long term planning, when, of course, you’re combining things together, then it might be easier to, to have the joint checking, because then you can do the joint budgeting, and so on for long term plans, and may help build trust and the relationship. So there is obviously to, to communicate whatever your whatever your financial situations are, the communication, I think is going to be the important thing.
05:29
And if you if you do, you know, like sitting down and looking through the finances in some kind of joint setting, that could be a good thing, splitting large costs, like rent or mortgage may be easier. So obviously, if you’re paying the mortgage, or the rent, or any large purchases that are joint purchases, then it could be easier to pay it out of one checking account. But I don’t think that’s really a big problem either if you want to two checking accounts, because you know, if you’ve ever dealt with, obviously before, like a like a roommate or something like that, or before having a joint checking account,
06:02
then of course, you can have the payments coming out of one checking account, you can have someone else having automatic payments going into that checking account. So you can clearly set up ways to pay your joint bills in a way that you would agree with just like and again, it doesn’t really matter, if you have a joint checking account or a separate checking account, you’re going to have to decide some way, you know, who should who should spend how much you know, on these types of things and have to split it up in a way that you think is even which can be difficult given the fact that you might have different income earnings between the two individuals that are involved, and, and so on, and so forth.
06:37
So those types of things are going to have to be communicated cons of the joint account. So once again, I think the major con of a joint account is that you basically have to have one kind of system in order to be to be tracking what’s going on in the joint account. And that typically means that one person will probably be the one that’s going to be applying their system and managing it if you have two individuals that have different systems, and they enjoy tracking to some degree, they’re they’re spending to some degree, then that’s when you I would think you would might want to separate accounts generally.
07:09
Other cons would be that you need to trust the other person financially. So obviously, when you’re putting the finances together, then you need to be able to trust the other person financially to do so both will be responsible for overdraft. So if there was a situation where there’s an overdraft type of situation, you actually owe the bank or something like that.
07:26
And then of course joint account, you both be responsible generally for that maybe more difficult to separate in the event you want to. So if you were to basically separate, then obviously the joint account would be more difficult to do that. So pros have separate accounts. So now let’s just think about the separate accounts, both individuals have independence over some portion of their finances.
07:49
And again, I think that would be one of the major kind of things that you’d want to do notice that if you have a joint account, like you might want to track your expenses for your own personal spending habits, and so on, so that you can kind of, you know, change or look at what you’re spending money on and so on and so forth, which can be a little bit more difficult.
08:05
On a joint account, you can do it still. Because you can you can use software and basically use like class tracking and whatnot, to break out what you spent money on and what the other person spent money on. So that you can basically track your own personal behavior. Because once again, the only thing you really have control over is your own personal, you know, spending habits and behaviors and whatnot. So you can’t track that in a joint account. But it takes a little bit more work.
08:30
Generally to do that, right. If you had your own checking account that only shows the money that you are spending and receiving, then you can it’s a little bit more easy to do the books to see exactly what you are doing and receiving spending and receiving versus, versus the other person. So I would think just general style in terms of of what what you enjoy doing is that important to you, or, or not? So may work best if both individuals enjoy management, their own finances, especially if they have different methods of doing of doing that work well for them.
09:03
So if you already have basically, as you said, have been, you know, I’ve worked with people, they say, you know, I’ve been management, my finances for my entire life, I have a system that works for me, you know, I would like to continue that, at least to some degree on the on the checking account, and you have two people that have two different systems, and that’s working for them, then I would think that would be the situation where separate accounts could work well.
09:28
Cons of separate accounts, may be more difficult to plan for long term goals. So when you’re planning for things like retirement, you’re planning for the purchase of a car you’re planning for some kid going to college or something like that, you might be a little bit more difficult to plan but still, I don’t think it’s that difficult to plan considering the fact that no matter what you do, if you have two separate checking accounts or one checking account, then you’re gonna have to put the money somewhere else when you’re planning for those type of objectives meaning a savings account in some way.
09:57
So if you’re saving for college, then you’re probably both putting money into, you know, the savings account that’s that hopefully is generating a return to save for some kind of college. And no matter what you do, whether it’s joint checking, or whether it’s separate checking, you have to determine how much of the money should be coming from you versus the other person, the partner, how much spending money do you have, versus the money that you’re going to put into these retirement plans and saving plans that are going to be taking place saving for retirement planning, or saving up for a home or a car or big purchase or something like that?
10:30
Typically, that’s not going to be done in the checking account, that’s going to be done by taking that money out of the checking account and putting it into some type of savings, which you’d want to think about. And no matter what you do, you got to say, Well, how where’s that money coming from? That we’re going to put into the savings account? Who’s, who’s putting how much on there? How much is that going to be limiting your spending, if at all, and the partner spending and so on, so forth. So may decide to use joint accounts for long term planning goals, while using separate checking accounts for daily management spending.
10:59
So again, you might you might be tracking for your own personal purposes. Again, you might have a system where you’re like, I want to know how much I’m spending, particularly on coffee versus something else, you know, my meals and where I’m spending my money on and so on. So you might want to manage, you know, your checking account your daily spending habits, in order to change your own personal behavior, while still combining other types of accounts. In essence, or, or mingling money together when you’re doing the long term planning.
11:27
And you have a joint goal, obviously, that you’re that you’re going for, in that case, maybe more difficult to manage joint costs, like the rent, mortgage and utilities. So this is that same kind of argument where well, it’s easier to take money out of a joint account, when you’re paying the mortgage, you’re paying the rent or the utilities.
11:44
But again, anyone who’s had like a roommate or something like that, no matter what you do, you’re going to have to basically decide who’s who’s paying more of the mortgage, who’s paying the rent, you know, what, you know, how are we divvying up the responsibilities and whatnot, and whether it’s in a joint account or not, you’re gonna have to kind of figure that out. Now, obviously, when it comes to the logistics of paying these bills, like the mortgage or the rent, you don’t want to miss one of those payments. So you might say that the mortgage and the rent comes out of one principal account, one of the partners checking accounts.
12:15
And you might say that the other partner is going to have a direct deposit that will go into that account for whatever, whatever amount has been agreed on, so that you can split, split the payment for those for those types of things. So I mean, the idea that it’s going to be in one checking account, and therefore you don’t have any kind of debate over who’s paying more for the mortgage or the rent, I don’t think I don’t think is, you know, I don’t think that debate kind of goes away. It. The goal was to be clear on on it and put together a system that aligns with everybody’s values, and so on. So those are just some factors that to consider.