If you grew up with married parents, chances are your household finances were managed as a single unit. Even if one spouse was the primary financial decision maker, everything was probably funneled into combined accounts. That traditional norm is changing.
As millennials get hitched, we're seeing a shift towards more households where each individual manages their own ﬁnances. In a recent survey, 37% of married millennials said they kept separate ﬁnances from their spouse.¹
So why the shift, and what does it tell us about this generation? Millennials have several reasons for keeping their money separate in a relationship. Read some of the factors as well as other things to consider.
Millennials Get Married Later
Unlike earlier generations, millennials are in no hurry to tie the knot. In 2019, the average age for those in their ﬁrst marriage was 29 for women and 30 for men. These ages are higher than any other time in U.S. history.²
Couples who are older when they marry may be more set in their ways and used to handling their ﬁnances on their own. And, those who get married when their careers are more established may be more hesitant to combine bank accounts.
Many Millennials Aren't Getting Married at All
Marriage rates among millennials remain lower than past generations. Only 44% of millennials were married in 2019—compared with 53% of Gen Xers and 61% of Boomers at a comparable age.²
Because there are fewer legal protections for unmarried couples who combine their ﬁnances, it may make sense to consider keeping separate accounts.
Whatever a couple determines is best for them, it’s smart to talk about ﬁnances instead of ignoring them.
Millennials Have More Debt
Millennials are saddled with debt. Nearly half have student loan debt and the average millennial has a net worth of $8,000.³ It can be awkward to bring this ﬁnancial baggage into a relationship.
Some couples may prefer to keep ﬁnances separate while one person is paying off debt, only combining ﬁnances when both parties are debt-free.
The Downsides of Not Combining Finances
Keeping separate finances doesn’t erase all the financial tension from a relationship. Research from five studies found that couples with joint bank accounts were happier than couples with separate accounts.⁴
Another downside: couples who file taxes separately might pay more taxes than those who file jointly.⁵ Those who file jointly typically get more tax deductions and credits. A tax advisor can discuss your specific situation.
It may be harder to reach certain goals when you manage money individually. Let’s say one partner wants to buy a house, but their spouse doesn’t have enough money saved up for a down payment. This can cause conflict. Talking about future purchases can help.
How to Manage Finances Separately
Some couples with separate finances each contribute to a joint bank account for bills and emergencies. They may add the same amount to the account or different amounts based on their salary. For example, if one person earns $100,000 and the other earns $50,000, they may find it easier to divide expenses based on a percentage of income.
Figure out what works best for you, your partner, and your financial situation. It may be worthwhile to revisit this arrangement once a year in case financial circumstances have changed.
You may want to set some ground rules, like not spending more than $100 on an item without consulting the other person. You might also divvy up saving for travel and other discretionary purchases. Talking to a financial therapist or marriage counselor may help resolve financial disagreements and establish fair rules and boundaries.
While some couples may keep their finances separate for the duration of their marriage, others may combine finances when they start a family. This is even more of a crucial conversation if one parent plans to stay home with the child while the other works.
How to Invest Together If You Have Separate Finances
Couples with separate finances can still create a symbiotic investment strategy. One way may be to meet with a certified financial planner who can provide guidance on your unique situation and work with you to determine how much each person should save to reach retirement and how to maximize each person’s tax savings.
Creating a common retirement goal can help get couples get on the same page, even when you have separate bank accounts. For example, a couple where one spouse is self-employed may need a different retirement strategy than a marriage where both individuals have access to a 401(k).
More married baby boomers combine finances than any other generation after them, and it speaks to one of the ways money and marriage are changing, Business Insider, November 2019.
As Millennials Near 40, They’re Approaching Family Life Differently Than Previous Generations, Pew Research Center, May 2020.
Meet the average American millennial, Business Insider, February 2020.
Joint Bank Accounts Make for Happier Couples, UCLA Anderson Review, February 2019.
Should You and Your Spouse File Jointly or Separately, Turbo Tax, 2020.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
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This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.