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Q&A: We want to merge our finances. How should we set up our accounts?

Welcome to the fourth issue of The Joint Account. It’s me. Hi. I’m the Douglas, it’s me. This week I am sharing the best way to structure your accounts so you and your partner can become the financial team you deserve to be. Let’s go!

Q: We want to merge our finances. How should we set up our accounts?

The name says it all–the name of the newsletter, that is. Much of what we’ll explore in The Joint Account deals with financial equity in your relationships. How can you make sure both partners have the power to make choices and take action in ways that feel fair? It begins with how you structure and organize your financial lives together.

I’ve seen just about every account setup imaginable. From managing it all separately to having one giant account for everything, nothing surprises me anymore. While there’s no one-size-fits-all solution that works best for everyone, there’s certainly a configuration that can promote greater transparency, access, and fairness for both of you.

Here’s what that looks like.

First, you must have a jointly owned checking account. Consider this your household’s main operating account, where you deposit paychecks and pay bills from. Suspend your feelings about who makes more money or who does all the essential shopping. When personal finance becomes a team game, both parties need to see how cash moves in and out of your lives. Transparency establishes that trust and equality. There should be no secrets with how you’re both spending your money.

Alongside a joint checking account, you should have a jointly held high-yield savings account. This account exists almost exclusively for holding your cash reserve (6-9 months of living expenses) and savings for larger short-term goals (i.e. buying a home or planning a vacation). Segregating cash between a checking account and a savings account allows for greater discipline in cash management, because it binds your spending behaviors to just one place. This also allows you to maximize the interest you receive on your cash. In today’s rate environment, checking accounts offer little-to-no interest, while high-yield savings can earn 5%.

Managing your cash right is the foundation from which you build your financial lives, so I believe partners should spend as one. However, a degree of autonomy goes a long way for some people to feel they’ve retained personal control (although I’d argue, you should be able to spend that freely from the joint account if you’re aligned with your partner). Having your own checking account for small expenses like shopping, gifting, hobbies, and mobile payments between friends is a fine idea. But you should decide on the amount you’ll both hold in your individual accounts and set benchmarks for replenishing them when funds are low.

What about credit cards? In the same spirit as having a joint checking account, you should have a joint credit card for handling day-to-day expenses. I like having one Amex and one Visa or Mastercard. Once again, it’s all an exercise in transparency. Each partner should be able to see what the other is spending. When used correctly, credit makes your financial lives easier. But when used incorrectly, credit can be toxic. Being unable to pay off your card in full each month is a sign that something is off. It could be something as simple as covering a large one-off expense, or maybe one of you has stepped out of bounds with your spending. It’s worth examining either way.

This setup won’t work for everyone, but it’s an excellent starting point for most couples to navigate their finances as a team. Account structures like this allow partners to build trust while also learning how money flows in and out of their lives together.

Send us your couples-n-money questions for the next Q&A: [email protected].

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