Joint Accounts vs Separate Finances: Modern Couples Are Using Joint Accounts Less!

What To Expect…

– Understanding joint account trends: The shift towards financial independence
– The role of communication and trust in managing shared finances
– Financial secrecy among couples
– Ways for couples to divide expenses fairly
– IE Hub’s data on the decline of joint account usage
– ClearScore’s research on how UK couples handle money
– Tips for choosing the right financial management approach for you and your partner.
– Historical context of joint accounts and their current status.

 

Managing joint accounts and finances as a couple can be tricky. What is important to know is that there is no ‘one size fits all’ approach to managing finances. Especially joint finances. 

To listen to a wider discussion on Dating and Money, see below: 

 

If you aren’t in a serious relationship or at the stage where joint accounts are a discussion, read our article on managing the topic of money when dating.

Now, let’s discuss joint accounts, how they have changed over time, what the data shows for UK couples managing joint finances and how to decide which method is the best choice for you and your partner.

 

What Are Joint Accounts?

A joint account is a shared bank account that two people can access. These are typically used for people who share bills, such as housemates, married people or cohabiting people in a relationship. Both people can deposit money, pay bills, and save, all from this one account. 

Whether it’s for the weekly groceries, mortgage, or just saving up for a rainy day, a joint account means you’re both in charge of the money that goes in and out.

Joint accounts make it easy for both people to chip in to cover expenses. Meaning no more “I owe you” moments. Another big plus is the transparency it offers. With a joint account, you both get a clear view of your collective finances.

Moreover, if you’re both savers, a joint account can help you with building a future together. Saving for a holiday, a new home, or just a rainy day becomes a shared goal. Joint accounts can be a great way to manage shared finances, but like all good things, they work best when there’s clear communication and trust between both partners.

 

IE Hub Reports a Drop of Nearly 14% in People Using Joint Accounts

It looks like a lot of people are becoming more independent when it comes to handling their finances.

Recent data from IE Hub reveals a very interesting trend: joint accounts are on the decline! Dropping from nearly a quarter of users in early 2022 down to less than 10% by April 2024.

Meanwhile, single-account users are on the rise, jumping from a solid three-quarters to a whopping 90% in the same time frame. 

Why is this? Are people becoming more likely to keep finances and debt management separate in relationships, or are more singles stepping up to manage their money? 

Whatever the case, it’s clear that independence is in, and the era of the joint account might just be fading out.

 

The History of Joint Banking for Couples

Joint bank accounts have been around for quite some time; some argue that they began at least as early as the 19th century (over 100 years ago!).

Back in the 1900s (20th century), joint accounts became the norm for married couples, but there was a catch – women’s access to banking and financial services was restricted. Men were often seen as the breadwinners in heterosexual relationships, while women’s roles were mainly about taking care of the house and family.

Fast forward to the mid-20th century, and women began to stand up and challenge the old-school rules that limited their financial independence. This era was all about breaking those barriers and making big changes in laws and attitudes toward women and money. 

With more women joining the workforce and dual-income households becoming more common, couples started to see joint bank accounts as more than just a convenience. They became symbols of equality, shared responsibility, and partnership. 

Nowadays, joint bank accounts are a common feature in many relationships. 

 

How Couples in the UK Manage Their Finances

In the UK, how couples manage their finances together is changing, reflecting a shift in attitudes towards financial equality and transparency. According to ClearScore’s research, only 40% of couples distribute their household bills based on their respective incomes, while over half (51%) opt for a 50/50 split. This approach, however, may not always be ‘fair’, especially for those earning below the national average salary, indicating a financial strain for lower earners.

ClearScore’s findings also suggest that some people hold financial secrets within relationships. About 17% of people admit to hiding debts from their partners, which increases to 24% among those aged 25-34. Interestingly, 1 in 4 respondents confess to hiding purchases. This secrecy is more common among younger couples.

In regards to the future, 49% of 18-24 year-olds think that their partner’s financial situation is worse than their own, causing concern about what this means for their joint future.

Despite these challenges, most couples discuss money at least weekly. Yet, nearly a quarter only talk about finances quarterly, and 20% wish they discussed finances more frequently. 

ClearScore suggests that a focus on financial equity, rather than equality, might suit some couples better, particularly where there’s a significant difference in earnings. This means that contribution to joint expenses is in line with how much each partner earns.

Notably, those who earn more often view this method of proportional sharing as a fairer approach compared to those who earn lower salaries.

 

Different Ways to Manage Joint Finances as a Couple

As every relationship is unique, finding the right approach to managing money together is key. Some prefer the traditional route of pooling everything, while others lean towards more modern methods. Mostly, this comes down to financial compatibility.

Let’s explore various ways couples can handle their joint finances. 

Joint Account for Everything

Both partners combine all their income into one joint account and pay all expenses, including personal expenses, from this account.

• Example: Both deposit their monthly earnings into one joint account and use this for all expenses, including personal shopping.
• Pros: Promotes transparency and unity; easier to manage one account.
• Cons: Can lead to disagreements on personal spending; and loss of financial independence.
• Best For: Couples with similar spending habits and financial goals.

 

Separate Accounts with a Joint Account for Bills

Each partner has their own account for personal expenses and contributes to a joint account for shared bills.

• Example: Each partner has their own account. They contribute a portion of their income to a joint account for rent/mortgage, utilities, and groceries.
• Pros: Maintains individual financial independence; clear division of shared expenses.
• Cons: Requires more coordination; potential disagreement on how much each should contribute.
• Best For: Couples who prefer some financial independence and have different spending habits.

 

Proportional Contribution Based on Income

Each partner contributes to bills and expenses in proportion to their income.

• Example: If Partner A makes 70% of the combined income and Partner B makes 30%, A pays 70% of the bills and B pays 30%.
• Pros: Fair in terms of income variation; reduces financial strain on lower earners.
• Cons: Can be complex to calculate; may create a sense of inequality.
• Best For: Couples with significant income differences.

 

Higher Earner for Essentials, Lower Earner for Extras

The higher earner covers all essential expenses, such as bills, rent, and groceries, while the lower earner pays for non-essential items like entertainment, dining out, or holidays.

• Example: In a couple, Partner A earns more and pays for all the household essentials, while Partner B, who earns less, takes care of date nights, holidays, and other extras.
• Pros: Ensures that essential expenses are always covered; allows both partners to contribute in a meaningful way.
• Cons: May create a feeling of inequality in financial contribution; could lead to resentment if the division isn’t agreed upon mutually.
• Best For: Couples with a significant income gap who want to ensure financial stability while still sharing the joy of non-essential spending.

When choosing the best method, consider factors like your income levels, spending habits, financial goals, and how much independence each of you wants to maintain. Open communication about money and being on the same page on financial goals is key to finding a method that works for your relationship.

Key Takeaways: The Modern Couple’s Guide to Joint Accounts

1. The One-Size-Fits-All Myth: When it comes to managing joint finances, remember there’s no universal solution. The right approach varies from couple to couple, depending on a range of factors such as income levels, financial goals, and personal spending habits.
2. Transparency and Communication: Regardless of the method you choose for managing joint finances, the most important thing is clear communication and trust. It’s essential for partners to have open discussions about their financial expectations and habits.
3. The Decline of Joint Accounts: IE Hub has observed a significant drop in the usage of joint accounts. This trend suggests a growing preference for financial independence among couples or a rise in single individuals taking charge of their finances.
4. Financial Equality vs. Financial Equity: While some couples may prefer an equal split, ClearScore’s research points to the importance of being fair. Especially when there’s a considerable difference in income. It’s about finding a balance that feels fair to both partners.
5. Financial Secrets in Relationships: With a notable percentage of people hiding debts or purchases from their partners, it’s clear that financial transparency isn’t always practised. Such behaviour may lead to friction and stress within relationships.
6. Modern Solutions for Modern Problems: Today’s couples are exploring various ways to manage joint finances. From traditional joint accounts to separate accounts with a shared purpose. The key is to align the chosen method with both partners’ financial realities and aspirations.