Is there a “best way” to handle money in a committed relationship?…. Yes, despite what you may have read elsewhere...
Friday, September 22, 2023.
Revised November 10, 2023. When the personal invades the realm of ideas, chagrin and mortification often result. Revised again Saturday, July 27, 2024. Because I should not take personal attacks so personally.
As previously discussed, researchers recognize that financial disputes are strongly associated with separation and divorce.
A recent study contradicts earlier pre-COVID research, which suggested that there was no "best" financial arrangement for managing family funds.
This new two-year, post-COVID study reveals that couples who pool their finances experience a higher degree of marital satisfaction. Additionally, married couples who managed their family funds with a joint bank account reported feeling better about their household finances and experienced fewer financial arguments.
The researchers proposed that pooling funds encourages a communal approach, whereas maintaining separate finances may foster a more transactional mindset.
Dr. Jenny Olson, the study’s lead author, stated:
“When we surveyed people in relationships of varying lengths, those with merged accounts reported higher levels of communality within their marriage compared to those with separate accounts or partially merged finances. They often expressed feeling more like they were 'in this together.' This is the strongest evidence to date regarding a question that significantly impacts couples’ futures. Observing these meaningful shifts over two years is a powerful testament to the benefits of merging finances. On average, merging finances warrants a conversation with your partner, given the effects we’re seeing here.”
How the study was conducted
The study followed 230 newlywed couples over two years. Some couples were randomly instructed to open a joint bank account, others to maintain separate accounts, and a final group was left to their own devices.
The results indicated that couples with joint accounts were significantly happier with their relationships two years later.
Dr. Olson explained that part of this happiness stemmed from promoting a communal relationship:
“A communal relationship is one where partners respond to each other’s needs simply because there’s a need. ‘I want to help you because you need it. I’m not keeping track.’ This ‘we’ perspective, which we theorized is related to joint bank accounts, contrasts with the more transactional approach of separate accounts.”
Couples with separate finances often viewed financial decision-making as more of an exchange, with one partner covering one expense and the other covering another.
Dr. Olson noted:
“It’s ‘I help you because you’re going to help me later.’ This tit-for-tat approach is more common with separate accounts, akin to business-type relationships.”
Benefits of joint checking accounts
Previous research has identified three key reasons why joint checking accounts can improve committed relationships from the start.
First, joint checking accounts encourage individuals to justify their purchases to their spouse, leading to more conservative and justifiable spending (Garbinsky and Gladstone 2019). This can reduce unnecessary purchases and financial disputes, thereby enhancing the couple's overall financial well-being.
Second, joint accounts promote transparency and openness about financial matters. The process of managing a shared account makes it more difficult to hide impulsive or improper spending habits. Early transparency can foster a more productive dialogue about financial preferences and establish healthy communication habits.
Finally, good conversational habits about money can help new spouses align their financial goals and create joint objectives, as noted by Fitzsimons, Finkel, and vanDellen (2015). This alignment can lead to better cooperation and satisfaction in managing household finances.
Addressing criticisms
A colleague of mine recently saw this post and critiqued this research, questioning the validity of the findings due to the study’s methodology.
She asked, "Would you join a study that allows total strangers to randomly control your marriage's financial resources?" This question overlooks the fact that the couples in the study were newlyweds who naturally had to decide how to handle their finances, as they had little shared financial history.
My colleague also mentioned selection bias, suggesting that only couples with a high level of trust would participate in such a study.
However, the researchers aimed to work with new couples to minimize pre-existing biases and establish a baseline for their future financial behaviors.
Contrary to my colleague’s claim, the study did not suggest that all couples should pool their finances regardless of their relationship history. It specifically focused on new couples and the benefits of merging finances early in a relationship.
Final thoughts
This research highlights the potential benefits of pooling finances for new couples, promoting a sense of "we-ness" and enhancing relationship satisfaction.
While it's important to consider individual circumstances, the findings suggest that a shared approach to finances can be beneficial in the early stages of a marriage.
To my colleague, your recent blog post seems to have misinterpreted the research. I took the trouble to discuss your critique with Dr. Finkel, and he concurs. I hope this clarification encourages more thoughtful and accurate engagement with the data in future discussions.
“Those reading the headlines and jumping on the research bandwagon would be wise to look more deeply.”
Be Well, Stay Kind, and Godspeed.
RESEARCH:
Garbinsky, E. N., & Gladstone, J. J. (2019). The consumption consequences of couples pooling finances. Journal of Consumer Psychology, 29(3), 353–369. https://doi.org/10.1002/jcpy.1083
Jenny G Olson, Scott I Rick, Deborah A Small, Eli J Finkel, Common Cents: Bank Account Structure and Couples’ Relationship Dynamics, Journal of Consumer Research, 2023;, ucad020, https://doi.org/10.1093/jcr/ucad020
The study was published in the journal Journal of Consumer Research (Olson et al., 2023).
