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Young Americans are embracing financial independence, even if it means keeping money separate from a spouse or partner.
A new study from Fidelity found that Gen Z and Millennials are more likely to have a personal bank account than Gen X and Baby Boomers. The survey of more than 3,000 couples or partners who have been together for three years or more found that 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.
Mixed approaches also seem to be gaining in popularity. About 42% of Millennial couples save money in both individual and joint accounts, compared to about 1 in 3 Gen X and Boomer couples.
Financial experts are alarmed by this trend, believing that separate accounts create confusion, lengthen timelines for achieving common goals, and open the door to financial fraud.
Why don’t more young couples cooperate financially?
One reason may be that more women are working today than when many baby boomers flocked to the workforce in the 1960s and 1970s. Before the Equal Credit Opportunity Act of 1974, women were routinely required to have a male cosigner before opening an account. According to the survey, 46% of women still feel financially dependent, compared to 16% of men.
People are also marrying later in life, giving them more time to build up their net worth before getting married.
“At the end of the day, what we all face is the emotional wall of, ‘What if this person isn’t who I thought they were?'” said Jade Warshaw, a financial coach and co-host of “The Ramsey Show,” adding that as couples marry later in life, they witness others getting divorced and “prepare for the worst instead of hoping for the best.”
The rise in student loans has also made combining funds more complex, with some partners wanting to deal with debt alone. Jason Fannon, a certified financial planner and senior partner at Cornerstone Financial Services, said he’s seen couples hold off on combining their funds because one partner wouldn’t otherwise qualify for student loan forgiveness.
Fannon said the “huge wealth transfer” in which trillions of dollars currently owned by older Americans are expected to be transferred to their children over the next two decades may also be a reason why young couples choose to handle their household finances separately.
“When someone brings $500,000 to a date and they’re in their late 20s and they probably don’t have much, I can see how that could be a problem,” said Fannon, 49. Meanwhile, for older generations, “a lot of people I know married their high school girlfriends or boyfriends, but none of them had money. There weren’t that many prenups that I knew of.”
But today, premarital sex is on the rise. Among those surveyed by Fidelity, 13% said they have a formal or informal prenuptial agreement with their spouse, compared to 29% of Gen Z.
Why couples avoid talking
Another reason couples keep separate accounts may be more simple. The thing is, talking about money isn’t always fun.
Of those surveyed, 44% said they avoided talking about money because they were worried about an argument, 31% said they didn’t want to worry their partner, and 21% said they were afraid of being judged or lectured.
Problems can arise if you don’t talk. Almost a quarter of respondents admitted to keeping financial secrets from their partner, and 68% said they didn’t know the full extent of their partner’s finances until they moved in together.
Warshaw advises couples to talk about money early.
“It’s not always a fun conversation, but you don’t have to reveal everything in one conversation,” Warshaw says. “You have to have them to know who this person is financially and how they view you, because everyone has built-in gender roles, how they were raised, what their expectations are.”
Separate account risks
Fannon said that while it makes sense for couples to choose to maintain separate accounts in some situations, he generally doesn’t recommend it.
He said if couples have difficulty managing separate accounts, it can lead to late or missed payments, especially if they can’t hold each other accountable. Missing these payments can lower your credit score and make it more difficult to borrow money in the future.
Similarly, managing money separately can make it difficult for couples to achieve financial goals like buying a home or paying off debt, he said, especially if they don’t know the other person’s savings and spending habits.
“There’s no getting around it,” Warshaw said. “As long as people on both incomes are on the same page mentally, you’re going to go light years faster. So not only should you ask your spouse for help, you should also expect help from your spouse.”
Fanon recommends that if a couple insists on maintaining separate accounts, be sure to list the other party as the beneficiary. Otherwise, if one partner becomes incapacitated or dies, the other may not be able to access the funds, he said. This is where lawyers and probate come in, but when someone is grieving, it can be expensive and emotionally taxing.
Beware of financial infidelity
Fanon said having separate accounts also increases the likelihood of financial infidelity if one partner isn’t upfront about where the money is going. In some cases, it may be intentional. One woman in the couple he advises keeps money in a separate account for getting her hair and nails done, and said they like it that way, too.
“The woman said, ‘I’m so happy because I don’t want you to know how much I spent on that either.’ So there’s this kind of agreement,” Fanon said, adding that while this is a light-hearted example, financial infidelity is often a way to hide spending on vices. “That’s if it works, but I’ve seen this fall flat.”
To avoid the worst-case scenario, Fanon recommends couples set monthly amounts in their respective spending accounts, generally agree on where the money will go, and avoid deviating from the plan.
“It’s just extra,” Fannon said, adding that ideally retirement benefits and bill payments should come from a joint account rather than an individual account. “We are not dependent on one or the other for the success of our long-term plans.”
Contact Rachel Barber at rbarber@usatoday.com, follow her at X @rachelbarber_ and subscribe to her newsletter Making More of Your Money here.
