Money In Marriage: Which Model Works For You?

In the last post we asked what happens if she earns more. Today, I want to discuss the different money models married couples (could) adopt and factors to take into consideration as you pick a money model for your marriage.

Why is this important?

Married couples argue about many things, but the worst arguments are likely to be about money.

With this in mind, you can see why it is absolutely critical for a couple to openly discuss money issues BEFORE getting married. There are four ways (and hybrids of the four) to handle money in marriage:

1. Joint account/ pooled income

2. Individual accounts with a shared expenses account

3. One partner pays all the expenses and gives the other partner an allowance

4. Totally separate accounts and each partners pays for specific expenses

Before I analyse them, I need to make an observation. Our society has attached how you handle your money to the level of commitment. For example couples who agree to pool income are seen as more committed than those who keep separate accounts. I think this is a wrong assumption, and it is more important for the two members in a marriage to be comfortable about how they’re handling money, than to meet some societal ideal.

No one method signals a successful marriage, go with the method you are both comfortable with

Joint account / pooled income

This is the simplest to explain. All the income goes into one account and expenses are allocated from this account. A couple that has this model may then choose to set up a separate savings account, an investment account etc, which draw money from the joint account.

I have also seen instances where the couple then has a “pocket money” amount that is transferred from the joint account to their individual accounts, to give them a bit of freedom and privacy in spending their money.

If you go for this model, ensure the following:

• You are both in agreement on the family budget, your savings and your investment strategy. Of all the methods, this one requires the most consensus between the couple.
• Since you both have  equal access to the money ensure that, either you have similar spending patterns, or are comfortable with each other’s spending patterns.
• Agree to discuss major purchases beforehand to avoid conflict when one person buys stuff, and the other  discovers the purchase when they check the account and realize some money is gone.

If you have similar money personalities, this method will be very easy for you.

Individual income accounts with a shared expenses account

I like to define this one as the “mine, yours and ours” model. Here, the couple agrees on the budget, and a contribution formula. They then open a family account which is funded from each partner’s income account. The sharing formula may be based on each partner’s income levels or an egalitarian 50/50 sharing.

If you choose to go with this method, it is important to consider each partner’s income level. For example if you go with 50/50, what happens if one partner gets a promotion and is now earning a lot more?

Circumstances change, and the most important thing is to be flexible and open enough to keep tweaking the model to reflect changing income levels.

Keeping your money totally separate

This is where each partner has their personal accounts, and the couple agree on how to share bills on case by case basis. I have seen this happen in Kenyan homes where the husband pays rent/mortgage and school fees, while the wife pays for clothing and other home expenses and each partner takes care of their personal expenses.

If you are going for this method, certain factors are critical:

• As you discuss how to split expenses, ensure you have a method on how to invest as a family too, or a way to discuss the investments each partner makes. This is because while investments may be separate, liabilities from these investments are a family problem.
• Fairness, or perception of fairness is important. We have instances where the expenses borne by each of the partners are determined by softer issues (such as cultural perception). In Kenya for example, men are expected to pay rent/mortgage. Does this mean that if the wife earns a lot more she cannot contribute? As sensitive as money issues are, it is important to realize that you are both in one team.
• It is important to discuss and agree to be flexible as circumstances change. If as newlyweds you agreed that the husband pays rent, what happens if you both build a house and you are not paying rent, but the house is costing a lot more in upkeep? What if one of you is laid off? Can the other’s savings be used to cater for expenses?  Discuss all these sad eventualities beforehand.

One partner pays all the expenses and gives the other partner an allowance

In some cases, one of the partner’s stays at home to take care of the kids, or because of the nature of their work earns significantly less than the other partner. In such instances, the couple may agree on a set monthly amount that the stay at home partner will be receiving from the working partner. Of course the working partner pays all (or most) of the bills. I have seen instances where the couple has a hybrid of this and the pooled model. Earnings go to one account, the non earning partner pays all the bills, and gets a fixed allowances for her personal expenses.

If you choose to follow this model, consider the following:

• The budgeting process should be similar to the other methods. Both partners are stakeholders in the family and should be fully involved in setting the family budget, the savings and investment strategy etc. The earning partner should be careful not to exclude the other partner from critical family decisions just because they’re not earning.
• The allowance is not a favour. The other partner may not be earning or may be earning little, but they are making a significant contribution to the marriage. The earning partner should be diligent in paying this allowance (just like all other bills) and the non earning partner should never have to beg.
• Agree on a sufficient allowance and the expenses it should cover, to avoid a situation where the non earning partner has to keep asking for money.

Of the four, what model appeals to you? Are there others we should discuss?

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