Married but separate: The case against merging your money

Getty ImagesGetty ImagesYou've probably heard the horror stories: A new widow doesn't know how to manage her money because her deceased husband always handled all of the bills. A couple divorces and one spouse has poor credit because he never built up enough of a record on his own name. Both spouses pool their money, but then one makes a huge withdrawal.

For many people, marriage means that as two lives merge so must the checking accounts. "When you get married, you become one," advises financial guru David Ramsey. "Money is a key area that helps bring unity. When you handle your money together, you are agreeing on your hopes, dreams and goals."

But many financial experts agree that there some situations where it makes sense for spouses not to co-mingle their money.

A 2005 study of more than 1,200 households by the Raddon Financial Group, an Illinois research and marketing company, found that nearly half of married couples -- 48 percent -- have more than two or more checking accounts, up from 37 percent just four years earlier. Why the uptick? Experts chalk it up to the high divorce rate in the US, the fact that two-income households have become more common, and the increase in the median age of first marriages.

With more people getting married (or remarried) later in life, along with the joy of finding love comes the burden of bad credit or ongoing financial responsibilities. In those cases, keeping separate checking accounts and credit cards can be a wise idea, because it protects one spouse from the financial liabilities of the other.

"You do not have to mingle your finances," says Candace Bahr, co-founder of the non-profit Women's Institute for Financial Education and of the Bahr Investment Group. "In second marriages, many people don't co-mingle funds -- especially if you have children from your first marriage." When one spouse has financial responsibilities that the other spouse doesn't share, you don't want to confuse the issue by having everything in one pile." In this situation, it's advisable to make alimony or child support payments from a separate account, rather than from a joint account with your current spouse. "It can take a forensic investigator" to separate the first-marriage finances from the second-marriage accounts, Bahr points out.

For the same reason, financial advisers suggest that if you inherit a large amount of money, you keep that inheritance out of the communal pot. "That is the separate property of the person who has inherited it," Bahr says, adding that once it becomes co-mingled, "it can become very difficult to trace it over a period of years."

That doesn't mean that no financial accounts can be shared, however, and earnings from one spouse's inheritance or investments can still be used to benefit both spouses. Having separate accounts in addition to a joint account -- his money, her money, and our money, so to speak -- can help both spouses build credit in their own names and give each a measure of independence as well, something increasingly important for couples who marry after years of living (and making purchases and paying bills) on their own.

"Keeping some money separate doesn't mean you're keeping it secret," Bahr points out. "It just means that you're managing it in a different way, to your personal objective."

In some cases, husbands and wives have different financial temperaments -- he's more cautious, she's more willing to take risks. One solution: Split up your portfolio so that each spouse manages the portion he or she is most comfortable with. Another option: Have a joint saving plan in place, but continue to manage your IRAs individually. Either way, it's imperative that both parties talk frequently and specifically about the family finances -- even if only one of them is paying most of the bills.

"This is a very positive thing, I think, having both parties in a relationship taking responsibility for managing money." Bahr says. "Then you both know how to make decisions based on objectives."