When Sharon Cotter married her first husband 35 years ago, she didn't think twice about combining all of their bank accounts and letting her husband manage their investments. Then, when they divorced after 25 years of marriage, she had no idea how much money they had or where it was.
"I will never let that happen again," says Cotter, now 58 and about to remarry. She has two children and wants to protect their inheritance, as well as ensure she still has her own money in case something goes wrong in the new marriage. "You have to protect yourself, no matter how much you love someone," says Cotter, a career management consultant in St. Louis.
Like Cotter and her fiancé, more and more couples are ditching the traditional share-everything approach and keeping their accounts separate. Nearly half of married households have two or more checking accounts, up from 39 percent in 2001, according to Raddon Financial Group. That suggests a rise in his-her bank accounts. Financial advisers point to later marriages, higher-earning wives, and the prevalence of divorce as factors contributing to the use of separate accounts, while marriage counselors warn that split funds can lead to secrecy and distrust.
The trend appears strongest among remarrying baby boomers bringing substantial assets and financial commitments into their new marriages. "Typically they will have 'ours,' 'mine,' and 'yours' [accounts]," says Kathleen Miller, author of Fair Share Divorce for Women and president of Miller Advisors, an investment firm in Kirkland, Wash. She adds that separate accounts are useful for paying the expenses of children from previous marriages, for example. Many second marriages fail because of money issues, Miller says. That's why she recommends that remarrying clients have an open discussion about finances, plus enter into a prenuptial agreement.
Protecting yourself. Separate accounts also serve to protect women who earn less money than their husbands in case of divorce, Miller adds. She recommends that stay-at-home wives, for example, establish their own retirement accounts using a spousal ira, which allows nonworking wives and husbands to save money under their own name, using their spouse's income. While retirement savings would probably be considered jointly owned in the case of divorce, Miller says it's still important for both partners to have some savings in their own names.
Candace Bahr, cofounder of the nonprofit Women's Institute for Financial Education and owner of an investment firm whose clients are predominantly divorced women, points out that marriages don't last forever. "Even in the best marriages, one spouse is going to die. So it's still important to maintain your own identity," Bahr says. She recommends keeping assets, retirement accounts, and credit in one's own name. If one spouse is completely responsible for the finances, that leaves the other vulnerable in the case of death or divorce, she says.
Combining accounts slowly. Patty Sullivan, owner of a gift boutique in Kansas City, Mo., decided to maintain her own account when she married her second husband eight years ago. Throughout her first marriage, which ended in divorce, she and her former husband shared all of their money. This time around, Sullivan, 56, and her husband, Bob, each came into the marriage with children and significant assets. To protect their children, they kept the money they brought into the marriage in separate accounts, with their respective children as beneficiaries, and created a shared account for money they earned after their marriage.
Eight years later, they use their shared money to pay for their children's weddings and other family expenses. "We don't want to draw lines," Patty says. But they still maintain the separate accounts, which come in handy when they buy each other birthday presents. The Sullivans also plan to draw from the individual accounts to fund their retirement.
Keeping some "fun money" separate. Many advisers recommend separate bank accounts for all couples, not just those who are remarrying. "It's always best to have some separate accounts," says Sharon Epperson, author of The Big Payoff: 8 Steps Couples Can Take to Make the Most of Their Money—and Live Richly Ever After. "It just makes it a lot easier if [couples] can have an account that they go to for their own purchases where they don't have to tell somebody every time they're making a purchase."
She practices that approach in her own marriage. Epperson's husband likes to make almost daily purchases from Amazon.com, for example. "I don't bother my husband about it. I know it's on his credit card," she says. On the same note, her husband doesn't ask her about the makeup and clothes she buys with her own money.
Epperson's advice does not change for couples in which only one spouse works; she says a stay-at-home mom, for example, should also maintain her own bank account, with a percentage of her husband's income funneled into it. Says Epperson: "A stay-at-home mom who is not making any income should still have fun money," her term for individual accounts that go toward personal expenses. Similarly, if one spouse earns more than the other, equal sums should go into the individual accounts because they are based on household income, not each spouse's income, Epperson explains.
Blending different spending styles. When Kellie, 27, and Dan Mercurio, 29, married in 2006, they knew they wanted to have at least one joint account so as not to deal with the question of who pays for dinner. But the Charlotte, N.C., couple also decided to keep separate accounts for personal expenses, such as a new jacket for him or manicures and haircuts for her. "Having multiple accounts that serve different purposes is a good way to segment out record- keeping," Dan says.
It also prevents disagreements over how to track spending, the couple says. Kellie, a manager at Wachovia, likes to keep a record of each purchase by saving receipts, while Dan, a financial sales manager at the bank, prefers to keep just a general sense of how much money is in his account.
Despite their separate accounting, the couple say they do not keep secrets from each other and generally talk about all their purchases. "[Having individual accounts] just provides a little bit more freedom. If she wants to splurge on something, she can do it without asking me," Dan says.
Preserving financial independence. "Today people are mating and re-mating much further down the path," says Manisha Thakor, coauthor of On My Own Two Feet: A Modern Girl's Guide to Personal Finance. "That's why the financial three-way is gaining more traction." The financial three-way is Thakor's term for having a shared account as well as individual accounts for each spouse.
A survey by the newlywed website TheNest.com found that 60 percent of respondents, mostly young married couples, planned to keep at least some personal spending accounts separate. "Part of that partnership is recognizing each other's independence. It's a smarter way than throwing all of [your money] in one pot," says Riann Smith, deputy editor of TheNest.com. "You aren't looking over each other's shoulder and saying, 'Why did you spend so much on those shoes?' or that golf weekend."
"Women find [having their own account] empowering," says Jean Chatzky, author of Make Money, Not Excuses, a personal finance guide for women, which advocates separate accounts. Since more women than ever earn their own money, she says, they want more control over how they spend it. "You need to be able to get coffee without checking with your spouse," says Chatzky, which she says is easier to do when one has her own bank account.
Avoiding money secrets. Despite the enthusiasm among personal finance advisers for such a system, marriage counselors often see separate funds as a harbinger of marital problems. "When people insist on keeping their own account, that speaks volumes about their feelings," says Jack Singer, a clinical psychologist in Laguna Hills, Calif. It often suggests a lack of trust about another aspect of the relationship, he adds.
Singer does, however, suggest setting aside money for certain costs, such as those related to children from previous marriages, in a separate fund. It might be easier—both logistically and psychologically—to pay those costs out of a separate account that's funded once a year instead of doling them out from joint accounts each month, he says.
Cotter is now working with her lawyer on a prenuptial agreement, to lay out how her and her new husband's separate accounts will work. Says Cotter, "The lesson I've learned is whether I am single or whether I am married, I still need to take care of me and not expect anyone else to take care of me."