Young Americans are embracing financial independence, even if that means keeping money separate from their spouse or partner.
New research from Fidelity finds a larger share of Gen Z and millennials are holding onto their individual bank accounts compared to Gen X and baby boomers. The survey of more than 3,000 married or partnered couples who have been together for three or more years found 34% of Gen Z and 26% of millennial couples keep their money in completely separate accounts, compared to 19% of Gen X and 15% of boomers.
A mixed approach also seems to be growing in popularity. About 42% of millennial couples are storing money in both individual and joint accounts, compared to about one in three Gen X and boomer couples.
Financial experts are wary of this trend, believing separate accounts open the door to confusion, extended timelines for reaching shared goals, and financial infidelity.
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Why aren’t as many young couples combining finances?
One reason may be more women are working today than when many boomers got together in the 1960s and ‘70s. Before the Equal Credit Opportunity Act of 1974, women were routinely required to have a male co-signer before opening an account. Still today, 46% of women said they feel financially dependent, compared to 16% of men, the survey found.
People are also getting married later in life, meaning they have more time to build up their net worth before tying the knot.
“At the end of the day, what we’re all facing is the emotional barrier of, ‘What if this person doesn’t turn out to be who I thought they were?’” Jade Warshaw, a financial coach and co-host of “The Ramsey Show,” said, adding as couples get married later in life, they’ve likely witnessed people around them getting divorced, and begin to “prepare for the worst, instead of expecting the best.”
A rise in student loans has also made combining finances more complicated, as some partners want to tackle their debt alone. Jason Fannon, a certified financial planner and senior partner of Cornerstone Financial Services, said he’s seen a couple hold off on combining finances because one partner would have otherwise not qualified for student loan forgiveness.
Fannon said “the great wealth transfer,” which is expected to move trillions of dollars that now belong to older Americans into the hands of their children over the next two decades, may also be a reason young couples choose to handle finances separately.
“If someone’s bringing $500,000, and they’re in their late 20s, to a relationship, and perhaps the other person doesn’t have much, I can see how that becomes more of an issue,” Fannon, 49, said. Whereas, among older generations, “A lot of people that I know married their high school girlfriend, boyfriend, what have you, and no one had any money. There are not many prenups I was aware of.”
But today, prenups are on the rise. Of all those Fidelity surveyed, 13% said they have a formal or informal prenuptial agreement with their spouse, compared to 29% of Gen Z.
Why couples are avoiding the conversation
The other factor contributing to couples keeping their accounts separate may be more simple: It’s not always fun to talk finances.
Among respondents, 44% said they avoid talking about money because they are concerned it will start an argument, 31% said they don’t want to worry their partner, and 21% said they fear being judged or lectured.
Not talking can lead to problems. About a quarter of respondents admitted hiding a financial secret from their partner, and 68% said they didn’t have a full picture of their partners’ finances until after they moved in together.
Warshaw advises couples have the money talk sooner rather than later.
“They’re not always the most pleasant, but you don’t have to unpack everything in one conversation,” Warshaw said. “You need to have those so that you know who this person is financially and how they view you, because everybody has gender roles baked in, the way they were raised, what they expect.”
Risks of separate accounts
Fannon said while in some circumstances a couple choosing to maintain separate accounts can make sense, he generally wouldn’t recommend it.
He said if couples have a hard time keeping track of separate accounts, that can lead to late or missed payments, particularly if the two people are unable to hold each other accountable. Those missed payments can lead to lower credit scores and make borrowing money more difficult in the future.
Similarly, he said, managing money separately can also make it harder for a couple to achieve financial goals like buying a home or paying down debt, especially if they aren’t clued into the other partner’s saving and spending habits.
“There’s just no getting around that,” Warshaw said. “As long as the people with the two incomes are on the same page mentally, you’re going to go light years faster, so you should not only ask for help from your spouse but expect help from your spouse.”
If a couple insists on keeping separate accounts, Fannon recommends they be sure to list the other as a beneficiary. Otherwise, he said, if one partner becomes incapacitated or dies, the other may not be able to access funds. That’s when attorneys and probate enter the picture, which can be both expensive and emotionally taxing at a time when someone is grieving.
Beware of financial infidelity
Fannon said having separate accounts also increases the possibility of financial infidelity – when one partner is not forthcoming about where money is going. Sometimes, that may be intentional. He said one woman in a couple he advises has a separate account for money she intends to spend on getting her hair and nails done, and they like it that way.
“That woman was like, ‘I’m so glad because I don’t want him to know how much I spent on that stuff either.’ So, there’s kind of this agreement,” Fannon said, adding that’s a light-hearted example but that financial infidelity is often a way to cover up spending on vices. “That’s the case of it working out, but I’ve seen this also go sideways.”
To avoid the worst-case scenario, Fannon recommends couples establish a monthly amount going to each individual spending account, generally agree where that money will go and not deviate from the plan.
“It’s just extra,” Fannon said, adding retirement contributions and bill payments should ideally be made from a joint account rather than individual accounts. “We’re not really depending on either one for long term planning success.”
Reach Rachel Barber at rbarber@usatoday.com, follow her on X @rachelbarber_, and subscribe to her newsletter “Making More of Your Money” here.
This article originally appeared on USA TODAY: More young couples have separate bank accounts. What are the risks?
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