Understanding how couples integrate finances:
When it comes to how couples manage money, not everyone jumps to join their accounts.
New research from the University of Georgia looked at demographic and personal factors that revealed what makes couples more or less likely to pool finances.
A survey of more than 600 married or cohabitating individuals found that moving in together was not enough of a reason to combine finances. While some traditional indicators of stability—marriage, more dependents and higher net worth—increased the likelihood of joint accounts, having two sources of income made couples more likely to split finances.
"I just always assumed, based on my family background, that couples always pool their money. If they were married, they just pooled assets and income and made joint decisions," said the study's co-author John Grable, an endowed professor in UGA's College of Family and Consumer Sciences. "That's not always the case, and this study shows we can actually identify groups of people or profiles of individuals and couples where pooling resources is not as common."
The study's authors believe these results can not only help other researchers and financial counselors gain insight into financial integration styles, but they could help couples understand their approach to joint finances.
"Our research does suggest that people have a really hard time talking about money," said co-author, Ph.D. graduate, UGA part-time lecturer and financial planner Michelle Kruger. "So, if they're able to even establish whether they have the same kind of goals and values when it comes to spending money, that probably indicates a level of cohesiveness." Combining resources or keeping accounts separate
The study found that married participants were 4.5 times more likely to have pooled finances, which Grable said is expected.
"Pooling assets in a case where there's not a marital agreement can be really dangerous for the couple and the individual because the law doesn't provide the same protection for unmarried cohabitating couples as it would for a married couple," Grable said.
The impact of net worth, on the other hand, was more surprising.
Individuals identified their household's net worth as positive, zero or negative. Couples with a positive net worth, meaning their combined assets were higher than their combined debts, were more likely to merge finances. Those with a neutral net worth were less likely to combine, and negative net worth did not have a significant impact either way.
"To me, it was interesting that it wasn't driven primarily by income. It wasn't necessarily the level of debt that mattered, but the net worth," Grable said. "And debt could include credit cards, student loans, auto loans, mortgages, those kinds of things."
Researchers also found that a growing household could push couples toward joint accounts. With a one-person increase in household size, the likelihood of a combined account increased by about 20%.
On the other hand, individuals with a bachelor's degree or higher level of education were slightly less likely to combine accounts. And couples with multiple income earners were about 50% less likely to pool finances. If both partners have income, they may choose to manage that income alone, researchers said. A non-working partner, however, could face challenges if they could not access any household income.
[...] While this study provided insight into how couples might approach their finances, there is not a hard and fast rule for what financial integration style sets couples up for success. That has to come from communication and seeking out resources or help when issues arise, researchers said.
"There are so many different ways that couples do this. What's most important is that they find a system that works for them," Kruger said. "But when there is trust and communication, couples can come to a place where they're both happy with how they're managing things."
Journal Reference:
Kruger, Michelle, Grable, John E., Palmer, Lance, et al. Factors Associated with Couples Pooling their Finances, Contemporary Family Therapy (DOI: 10.1007/s10591-023-09666-9)
(Score: 1, Flamebait) by Rosco P. Coltrane on Wednesday May 31 2023, @04:14PM
Joint accounts: Sir fills up the account, Madam empties it
Separate accounts: Sir fills up his account, Madam says no-scratch-no-snatch-tonight, Sir empties his account.
(Score: 3, Informative) by pTamok on Wednesday May 31 2023, @04:53PM (2 children)
There's a false dichotomy lurking in the article.
It's not pool everything or not.
What you do is establish a joint pool, to which each contributes according to their income. Joint household expenses are paid for out of the pool, which is refilled in the same proportions when it runs low. So each contributes to the household expenses (which includes joint holidays etc) according to their means, and everything gets paid for.
What you do with the excess above basic household expenses is up for negotiation. Or gift giving.
Of course, if the lower-income partner resents the higher income partner's increased disposable income in comparison to their own, you have a path to relationship problems - but things like meals out, going to the theatre or other shared experiences can also be paid for out of the joint pool, but one partner doesn't need to pay for the other partner's (selfish) hobbies or indulgences.
I've seen this model work very well, but also founder when the spendthrift partner felt the common pool could be used for anything. Sensible people are likely to make any system work. Others will misbehave no matter what.
(Score: 2, Insightful) by Anonymous Coward on Wednesday May 31 2023, @09:38PM (1 child)
Similar result, but different & inexact method. I'm the high earner by 5x+ and I own the house (no mortgage), although we picked out the house together. I pay the property taxes, house insurance, and for anything that will be part of the house like the kitchen upgrade currently under discussion. My partner does the lion's share of the outside yard work, since they enjoy it, but I jump in whenever it's a two person task.
Non-house larger expenses like auto service & insurance we each pay our own, just like we did before we moved in together.
For other living expenses - heat(gas), electric, water & food - we have a joint account that we contribute equally to.
For joint entertainment, restaurant meals, I usually pick up the tab.
We've also done wills that work similar to a marriage -- if one of us goes first the other gets their assets. Reminds me, we're due to update wills, since our parents are gone now and our assets have changed.
Worked for 20 years so far, including one of their adult kids moving in with us. The kid is only able to contribute a token amount from a small (medical) disability.
Note that it's about more than just splitting bills, there is so much unpaid work to maintain a house, cook, clean, etc. which also needs to be discussed.
My parents were very open about discussing their finances and even involved me when they made out their wills. That background has helped a lot, the books are open in our relationship.
(Score: 2) by Ox0000 on Thursday June 01 2023, @07:10PM
You speak truth and wisdom.
(Score: 2) by HiThere on Wednesday May 31 2023, @05:54PM
Everything was in joint ownership, but each particular thing had one person's name listed first. That person was considered the "dominant owner", even though legally everything was joint ownership. I think you've got to get along pretty well to make that work, though. If you do, however, it can definitely make things work better.
Javascript is what you use to allow unknown third parties to run software you have no idea about on your computer.
(Score: 2, Interesting) by Maskawanian on Wednesday May 31 2023, @06:03PM
I made a write up of how my wife and I split bills.
https://www.dsaul.ca/Articles/BillSplitting [dsaul.ca]
We use the ratio of our income to determine a fair amount. It's worked for us for 7 years.
(Score: 0) by Anonymous Coward on Thursday June 01 2023, @04:02AM (3 children)
Too many people seem to get married without even deciding with each other on the "obvious stuff" examples:
a) How many kids/dogs/cats/pets (what happens if they really want kids but he/she/both have probs - is adopting OK?)
b) How to share the money/expenses/stuff/lottery wins&costs
c) What's non-negotiable (e.g. don't ever flame/badmouth my parents)
d) What they'd want to do if shit happens (e.g. lose job, coma - pull plug or not and when)
(Score: 2) by kazzie on Thursday June 01 2023, @06:53AM (2 children)
Counselling might not be needed if both parties can just, you know, talk about these issues.
I co-habited with my partner for over five years before getting married (delayed for various reasons). That time was great for ironing out those details you mentioned.
We didn't pool assets at the time, but we hardly had any assets: as renters without a car, the most expensive thing we owned was probably a desktop computer. The fact that we alternated major breadwinner roles as the other did more education/training also helped us get better at communicating financial matters.
(Score: 0) by Anonymous Coward on Thursday June 01 2023, @09:19AM (1 child)
Of course it's not needed if they actually do it, but from what I see - plenty don't.
There are also plenty of guys who do things arguably in the wrong order:
e.g.
1) Make babies
2) Get married
3) Get to know the girl
Of course, I'm not saying it can't work out...
(Score: 0) by Anonymous Coward on Friday June 02 2023, @02:31AM
I must have been smart, because I skipped a couple of grades?
> 3) Get to know the girl
Did that first, never did do 1) and 2).
Ps. The girl came with adult kids from her first marriage, I got to know them too and we all get along fine.