Before exploring digital support for household finances, it is important to understand the environment in which today’s household finances are managed. First, the vast majority of households in the UK have access to some sort of bank account according to the University of Birmingham’s Financial Inclusion Annual Monitoring Report 2015. Second, the monies that flow in and out of households today are generally digital monies; pay is delivered by electronic funds transfer; regular bills are paid by direct debits; and much expenditure is made using debit or credit card. Thirdly, people manage their money using on-line bank accounts and bank account apps on their mobile phones. In essence, most households are already brushing up against digital technology in some form or another when managing their money.
The final key aspect that critically affects household money management has nothing to do with digital technology, and everything to do with the relationship between the householders. When a couple set up a household, one of the most significant choices that they make is to decide which account(s) their income is to be banked. This simple decision not only reflects their attitude towards money but also has significant ramifications for the way they will communicate and work together to deal with the day-to-day practicalities of household living. This was item a) of six household management activities that were listed In the previous entry, and the decision impacts all the other five activities – b) checking the monies coming in; c) deciding what to spend the money on; d) deciding who is responsible for what element of spending; e) checking what has been spent; f) assessing future levels of cash and deciding on any actions required to change those future levels.
The broad options for deciding where income is to be banked are straightforward:
- each individual’s income goes into that individuals bank account and stays there;
- each individual’s income goes into that individuals bank account and a portion of it is automatically transferred to a joint bank account;
- each individual’s income goes directly into a joint bank account.
In the first case, when the monies go into an individual’s account, the other person may have no visibility of the amounts going in nor how it is spent; and this can make discussions about household spending a little less open and free-ranging. At the other extreme, if both individual’s income goes into a joint account, both parties are likely to have much more knowledge about income levels and to have a greater sense of ownership of the combined monies. The middle option, when part of an individual’s income goes into a joint account, is a half way house whereby individuals will have knowledge and ownership for part of the monies.
These three approaches are huge simplifications of what actually goes on. I haven’t been able to come across research data on this, but conversations with family, friends and colleagues over the years, and things I’ve read in books and articles and have seen on TV, indicate that there are many different ways in which each of these options can be performed in practice. For example, just because income goes into an individual’s account doesn’t necessarily mean that the other partner doesn’t know how much it is, or can’t access the account. There are also many different reasons why a couple may choose one of the three options; for example, they may decide to put income into an individual’s account because the other partner may have a poor credit history. Despite these uncertainties, however, the three different options will usually have some impact of the sort described; and will almost certainly affect what digital tools are chosen to assist the management of household finances .