Half of Millennials merge finances before marriage

Hadley Malcolm | USA TODAY

Millennials don't feel the need to put a ring on it in order to open a joint checking account or start racking up points on a shared cash-back credit card.

For them, merging finances has become the norm in modern relationships, where couples are increasingly choosing to shack up sans an exchange of vows.

The share of both men and women ages 25 to 34 living with a partner has more than doubled from 20 years ago, according to Census data — for men it went from 6.9% in 1995 to 14.7% in 2014 and for women it went from 6% to 14.3% in the same time period. And that often means that unmarried couples are not only sharing the keys to an apartment, but discussing how to budget, creating a division of financial responsibilities and holding each other accountable for joint expenses.

In a recent survey by Credit Karma of both Millennials and Baby Boomers, half of married Millennials had either fully or partially merged their finances with their spouse before marriage, compared with a third of Boomers. And more than a third said they either relied entirely on joint credit cards or had at least one joint credit card along with individual cards, prior to marriage.

A willingness to combine finances without the legal commitment of marriage is part circumstance — more Millennials are living together — and part comfort level, says Stephany Kirkpatrick, a certified financial planner and vice president of operations and financial advice at budgeting site LearnVest.

"It’s when you find yourself facing money questions together," she says. Plus, thanks to a growing number of budgeting sites and personal finance advice start-ups aimed at Millennials, they're a generation more comfortable talking openly about money. "It’s a growing area where people are willing to seek out advice from a peer, a friend," Kirkpatrick says.

For many Millennial couples, moving in together often means keeping separate accounts but paying each other back for shared expenses, or dividing bills so that each person is responsible for a roughly equal share. But despite the growing ease of money transfers through apps like Venmo, some don't want to deal with the tedious task of keeping track of who has paid for what.

"I just think that’s way too much work," says Tali Schiller, a 28-year-old who lives in Cambridge, Mass., with her boyfriend, Eli Badra, 29. Schiller and Badra have been together five years and living together for about one. They share a credit card and a checking account and split all of their expenses 50/50. They still keep separate bank accounts.

"We’re both of a mind of what should be joined and what should be separate," Schiller says. So, clothes? Separate. A wedding gift for a wedding they're attending together? Goes on the joint credit card.

Couples say that successfully combining finances and avoiding tension comes down to trust. But without the legal protection of a marriage license, couples should proceed cautiously, financial advisers say.

Before going all in with your significant other, here are the hard questions you need to ask yourselves:

• What do you make? You can't begin to create a plan for sharing expenses if you have no idea what the other person brings in each month. Be honest with each other about exactly what you earn and can afford to pay for, says Karen Carr, a certified financial planner with the Society of Grownups.

• Got debt? Disclose how much student loan debt, credit card debt and any other debt you have, because it will affect how you work toward financial goals together. It's also important to discuss your philosophies on debt and the use of credit cards, says Ben Barzideh, a wealth adviser with Piershale Financial Group. If you have a joint credit card, make sure you're on the same page about what's fair game to charge.

• Joint credit cards or authorized users? They aren't the same thing. If you and your partner have a joint credit card account, you have the same access to credit and responsibility over the account, says Bethy Hardeman, chief consumer advocate for Credit Karma. If one partner is an authorized user on an account, they aren't legally responsible for any debt and usually can't perform certain actions, such as balance transfers or redeeming rewards. But both joint account holders and authorized users have the potential to affect each other's credit scores.

• What if we break up? What would happen to a joint savings account if you were to break up? What about any debt left on a shared credit card? It may be an uncomfortable conversation but when you aren't married, you don't have the legal protections that come with the union and you'll need a contingency plan in place, Carr says.

• How about a cohabitation agreement? It's like a prenup, but for unmarried couples, Kirkpatrick says. You can download a template at sites such as LegalZoom.com or LawDepot.com. It will prompt you to make a specific game plan for untwining your financial lives should you break up, or move out. If your relationship takes a turn, it will give you "something to fall back to that's not emotional," Kirkpatrick says.

Here's how four Millennial couples have chosen to share expenses:

Tali Schiller, 28, and Eli Badra, 29

Relationship: Together five years. Living together for one year in Cambridge, Mass.

Strategy: The idea of tracking expenses independently and staying on top of paying each other back seemed like a hassle, Schiller says. So while she and Badra keep separate bank accounts for personal spending, they have a joint checking account they each contribute $300 a month to, which covers everything from groceries to household bills to meals out. They also opened a joint credit card, which they charge these types of expenses to and use the joint checking account to pay off. They opted for a credit card for better fraud protection and for the cash-back perks.

"We weren’t nervous about combining our credit at all," Schiller says. "We both have access to it, and we both trust each other."

The couple split all expenses 50/50 despite having different salaries, "just to keep it egalitarian," Schiller says.

Emily Hanna, 29, and Mason Strand, 30

Relationship: Together five years. Living together for four. Recently relocated from Chicago to Oakland.

Strategy: Hanna, who has usually worked for non-profits, and Strand, who just started law school, have always had a wide divide in incomes. Strand fronts the couple's expenses, and Hanna transfers him money for things like groceries and pet insurance, which they divide evenly. She also pays him back a portion of their rent and covers the entire cellphone bill, while Strand covers their utilities.

"Right now we're basically operating on a trust system," says Hanna, adding that they opted to keep their finances separate to maintain independence. "I just want to do my fair share. It's always negotiation. But there's no animosity."

Jayda Leder-Luis, 25, and Charlie Siegler, 26

Relationship: Together seven years. Living together for four. Engaged since July. Live in Boston.

Strategy: The couple have relied mostly on a chalkboard on a wall in their apartment, where they jot down what they each pay for joint expenses — groceries, the Comcast bill. But the system has always been a bit haphazard, because they sometimes forget to write down when they've bought something, and they alternate paying for things so often that it becomes difficult to keep track of their bills.

But Leder-Luis says the system has never caused a fight. They have always had a fairly relaxed approach to combining their financial lives, spotting each other if one person couldn't pay the other back for several months. They recently opened a joint checking account, and Leder-Luis got a credit card, both solely for wedding expenses. They'll use their joint checking account for expenses like rent after they're married.

"We’ve known for a very long time that we wanted to spend our lives together," Leder-Luis says. "So the money aspect we’ve just said, 'It really doesn’t matter.'"

Deirdre Costello, 32, and Howard Martin, 34

Relationship: While they've been married five years, they lived together for a year and a half before marriage and their financial strategy has changed significantly since then. Live in Melrose, Mass., outside Boston.

Strategy: Before they got married, Costello was meticulous about tracking the couple's expenses with a Google spreadsheet. While they kept separate bank accounts, the two split bills evenly and paid each other back each time one of them bought something, like gas or groceries. Howard eventually started picking up more expenses, like treating them to dinner, because he was making more money at the time.

Once they were married, they ditched the spreadsheets. At first they relied entirely on joint accounts, until they realized how draining it was having to check in with each other every time they wanted to make a personal purchase, like new clothes. Now they have a joint checking account in addition to personal checking accounts, plus two joint savings accounts, one for emergencies and one for goals. They also have two joint credit cards, primarily for emergencies and larger expenses like plane tickets.

"The small tallying of everyday tasks, including finances, none of that stuff matters anymore," Costello says. "It’s really freeing and exciting."