In today’s diverse society, couples made up of members of different races are an increasingly common sight. As these couples navigate their unique relationships, they often encounter all sorts of challenges—just like any couple, really, whether they’re same race or different—that are inherent to being in a romantic partnership. But some couples face additional obstacles that are specific to their interracial nature. And one of the intersectional challenges—if you will—that some interracial couples face is that of managing their finances.
This is a topic I first came across when reading a post on the financial advice website The Balance a few years ago. And I was intrigued enough by it to look for more information. I interviewed a couple in an interracial relationship about their financial practices (both good and bad). And I did a lot of research to find out what kinds of trends and outcomes are associated with the finances of interracial couples.
Understanding Joint and Separate Accounts
It is crucial to comprehend the particulars of joint versus separate accounts before plunging into the details. Joint accounts are opened by two or more people—like couples or business partners.
Joint Accounts
A joint account is a bank account shared by two or more individuals. In most cases, both parties have equal access to the funds and can make deposits or withdrawals. Joint accounts are often used for expenses associated with living together, like rent, shared utilities, and other household costs.
Separate Accounts
Individual bank accounts are maintained by each partner, in which he or she manages the finances. These accounts are the sole domain of each partner, who is responsible for all the funds and transactions therein. That setup allows people who are not single to live like singles—all the while sharing space and conversation with another person.
The Pros and Cons of Joint Accounts
Pros
- Perking Up Productivity: Having a shared workspace can lead to increased productivity for couples. By splitting up household tasks and working together in a single shared office, not only do couples have more time to spend together, but they are also getting twice as much done in the same space.
- Greater Clarity: A joint account is conducive to achieving clarity in financial matters. It allows for the almost daily occurrence of the discussion of money and how it is spent. And when spending is discussed, hopefully it is in the context of trust. If no trust exists between partners, there is little reason to believe that a shared account will contribute to a shared life.
- Simplified Financial Planning: Shared bank accounts allow for effortless financial planning in the simplest terms. When it comes to future financial goals—buying a house, saving for a vacation—couples can easily pool their resources and work in tandem toward those objectives without getting tripped up by the convoluted nature of joint financial planning.
- Joint Responsibility: Shared accounts promote joint responsibility when it comes to making financial choices. This often results in more productive conversations about not just the day-to-day management of money, but also about long-term financial objectives.
Cons - Loss of Financial Freedom: One of the main disadvantages of joint checking accounts is that they can take away your financial independence. You may not even realize how much your independence is being affected until you start living with your partner and using a joint account. You may feel like you have to ask for permission to spend money on certain things, which can lead to all sorts of resentments, pent-up frustrations, and future relationship problems.
- Conflict Potential: Conflict can arise from money in relationships. Disagreements over spending, financial priorities, and budgeting can lead to relationship problems. When couples have a joint checking account, they might be more likely to bicker over it and thus be on the road to potential relationship conflict.
- Unequal Contributions: Occasionally, one partner earns much more than the other. For some couples, that’s a comfortable arrangement. But for others—especially couples who file joint tax returns—this imbalance can create feelings of inequality and resentment. After all, if one person is putting way more into the joint account, what’s stopping him or her from withdrawing way more from it as well?
- Unraveling a Joint Account After a Breakup or Divorce: If an account is held jointly, both individuals have access to the funds inside. However, after a breakup or divorce, both parties may still want access to the account… for different reasons. One person may want to use the account to pay bills and meet other necessities, while the other may want to drain the account and empty it of funds as quickly as possible.
The Pros and Cons of Separate Accounts
Pros - Financial Independence: Separate accounts allow individuals to maintain their financial independence. Each partner can manage their money as they see fit, which can lead to greater satisfaction and autonomy.
- Less Conflict: When both partners maintain their own accounts, they can argue over spending much less. And there may be less to argue about in total because, according to a 2007 study, couples with separate accounts tend to spend less overall. In 2018, researchers found similar results: partners living together but maintaining separate financial lives accrued more personal savings.
- Individual Aspirations: Different accounts let partners work toward individual financial aims without having to run decisions by the other. For example, one partner might be saving to finance a trip; the other might be investing in some new hobby. And both could be dealing with student loans—with or without the help of a specialized consultant.
- Simplified Separation: When a couple decides to go their separate ways, having individual accounts makes it much simpler to divide up their shared assets. Each person gets to keep his or her own account. That means each ex-partner has full control over his or her half of the assets. It makes even a bad breakup seem somewhat amicable.
Cons - Budgeting Made Complicated: When distinct accounts are maintained, it can become problematic to budget for expenses that should be shared. Not only may couples need to figure out a way to work together to pay for joint obligations, but they may also need to work out some rudimentary system of accounting for who has paid what in those arrangements. 2. Navigating Savings Goals: If a pair of partners has different ideas about what kind of purchase necessitates saving and what doesn’t, then obviously they are going to have a different savings plan. Any time two people save together, they are also saving apart. They may well reach consensus about what to save for, but en route, they traverse a lot of territory.
- Absence of Clarity: Parallel financial arrangements can result in a murky financial picture. Even if partners are working together to build a life, they might not have the financial-toolbox version of an architect’s blueprint. They can see some of the parts, but not all of them—and hence are not altogether clear on the picture of what has been built.
- Challenges in Financial Planning: Partners who maintain separate financial accounts may encounter obstacles when attempting to plan for shared financial goals. Even when resources are pooled, planning can be complicated, making it more difficult to reach objectives like purchasing a home together.
- Potential for Imbalance: If one partner earns much more than the other, having separate bank accounts can lead to an imbalance in the contributions made to the couple’s common financial pot. This may create feelings of inequality and even resentment over time.
Factors to Consider for Interracial Couples
Interracial couples might experience distinct obstacles when it comes to managing their money. These potential problems could stem from cultural differences, for instance. Couples need to think about the following when deciding whether to share or not share bank accounts.
Cultural Differences
Financial attitudes and behaviors can be profoundly influenced by cultural backgrounds. For instance, some cultures may put a premium on managing money in a collective way, while others may base their financial decisions more on individualistic principles. This is an important conversation for interracial couples to have, especially since many of them are raising children in a multicultural environment.
Communication Styles
Any relationship requires good communication, but it’s even more important in interracial couples, where communication styles may not be the same. With that in mind, here are some basic things that all couples can benefit from when it comes to talking about their finances:
Establish open lines of communication. This is necessary in any relationship. But in interracial couples, where styles may differ, it’s particularly important.
Financial Literacy
Financial literacy can differ from person to person, even among those from the same cultural background. For this reason, couples should take a good look at their individual and collective financial smarts and then work together to achieve a comparable level of understanding about not just budgeting, but also the “3 S’s” of fiscal fitness: saving, spending, and (here’s the tough one) investing. (By the way, when it comes to investing in the stock or bond markets, what works for one person doesn’t necessarily work for another.)
Shared Goals
Couples of different races should set and strive for shared financial goals. Heterosexual and same-sex couples, together with their children, should enjoy the same rights in achieving financial security as married people do. And whether they’re doing it together or separately, those goals should encompass the same basic, time-honored elements: saving for a home, planning for retirement, and paying for their children’s education.
Trust and Transparency
Successful relationships hinge on trust. For interracial couples, achieving this means making financial transparency a priority. Whether deciding on joint versus separate accounts, these couples need to work together to build the kind of trust that makes misunderstandings less likely—after all, nobody wants to have “the talk” that partners have when a lack of trust makes it impossible to move forward.
Finding the Right Balance
In the end, the choice between having joint accounts and having separate accounts is one that each couple makes based on their own unique circumstances. Many interracial couples seem to be finding a way to make a hybrid approach work, which entails having both joint and separate accounts.
Hybrid Approach
Couples can keep a shared account for common expenses but also have separate accounts for personal spending; this is the hybrid approach to couple accounting. It lets you be transparent with your partner about the money you’re both spending while earning a bit of freedom to spend however you want with the money in your personal account.
Establishing Guidelines
No matter what approach you choose, you and your partner need to establish clear guidelines for managing your money. And when I say “you and your partner,” I mean both of you together. Don’t let one person be the dictator; teamwork is essential. At a minimum, you should cover these three topics:
- How much each of you will contribute to joint accounts.
- How you’ll handle shared expenses.
- How you’ll talk to each other about money (in both good times and bad).
Conclusion
For interracial couples, deciding whether to have joint or separate accounts is an important choice. They can make an informed decision when they understand the advantages and disadvantages of each approach; when they take into consideration their particular financial situation and the nature of their relationship; and when they have a conversation—preferably over several sessions—about what kind of account arrangement would allow them to operate on the basis of open communication, trust, and compromise.