Joining hearts, hands, and finances.
© Jacob Lund, doomu/stock.adobe.com; Photo illustration EncyclopÊdia Britannica, Inc.
Did you just move in with your sweetheart? Recently get married? Congrats! In addition to many other decisions youâll make about life together, one of them will be whether or not to open a joint bank account.
Joint bank accounts have long offered a way for couples to streamline managing household finances and budgeting, and in the process, create a stronger bond.
Today, however, more couples question the idea that combining funds is necessary or even advantageous. Some couples choose to keep money in their own accounts and open a joint account to pay only those bills they share, such as rent, a mortgage, or utilities, or to save for common goals, such as a vacation.
Key Points
- Talk about your financial goals and spending habits before opening a joint account.
- Joint bank accounts make it easier and more efficient to manage household budgets.
- Consider linking accounts if youâre not sure youâre ready for a joint bank account.
There are other situations where a joint account can be useful, such as for a financial caregiver who assists a parent, grandparent, friend, or someone else to manage their finances and ensure bills get paid.
Not sure a joint account is for you? Before deciding, learn more about joint bank accounts and their pros and cons.
What is a joint bank account?
A joint bank account, often a checking or savings account, is owned by two or more people. As joint owners, they fully control all aspects of the account, such as getting debit cards, making deposits or withdrawals, or making purchases without the other personâs consent. That means you can splurge on grande cappuccinos every day without asking the joint ownerâs permissionâbut theyâll also see your daily java habit.
If you currently have an individual bank account, youâre already familiar with the mechanics of being an account owner. Joint bank accounts operate the same way. They pay interest, provide monthly statements, and report tax information at yearâs end.
To open a joint bank account, a bank will require you and the other account holder(s) to submit personal information, including:
- Names
- Birth dates
- Addresses
- Phone numbers
- Email addresses
- Social Security numbers
Closing a joint account is similar to closing an individual account, except that both parties need to agree to close it. Youâll need to withdraw any funds and cancel any automatic bill payments before closing the account.
Do I need a joint bank account?
It depends. Opening a joint account is a personal decisionâalbeit one made between two (or more) people. Some people believe having a joint account encourages discussion about spending and saving and may help strengthen a relationship.
For new couples, regardless of whether they decide to share funds, talking about money is important because itâs a natural way to explore shared goalsâboth short and long term. Some couples like to keep some money in a separate account for their own spending priorities.
Why might you consider a joint account?
- Budgeting. When all the money is in one place, itâs easier to track the monthly inflows and outflows. Thereâs no wondering whether your partner paid the electric bill, because youâll see it on the account ledger.
- Goal sharing. Mingling funds allows you to save for shared financial goals such as vacations, buying a house, or saving for retirement. You can see how much money each person is contributing toward the goals, and thereâs a sense of combined progress and achievement.
- Efficiency. Sharing an account can make it easier to maintain the accountâs minimum balance requirement, and it can help you qualify for fee waivers or a more attractive interest rate. Let the power of compounding help you reach your goals faster.
- Financial literacy. If you open a joint account with your child or children, you can teach them how to spend and save money while monitoring their financial activity.
Joint bank account cons
But for each argument for joint accounts, thereâs a counterargument.
- Emotional trigger. If you and your partner disagree on spending priorities, those small purchases in a joint account can turn eye-rolling annoyance into outright anger. And if one person spends significantly more, it could bring up emotional issues, especially if as a couple you havenât talked about joint financial goals. Thereâs also a greater chance for overdraftâtaking more money than is currently in the accountâwhen two people tap the same account without discussing withdrawal limits.
- Joint baggage. Creditors can take money from joint accounts to settle debts owed by one of the parties. If your partner struggles with managing finances and/or paying debts, you may be on the hook to pay, especially if you arenât married. Spouses have certain protections in some states, although in states with community property laws, you and your spouse equally share in all debts and property incurred during marriage. In other states, creditors may garnish half of the account. Each state has its own rules, so take that into consideration if youâre contemplating opening a joint bank account.
- Unbundling complexity. One of the biggest benefits of a joint account turns into a potential liability when couples break up or divorceâone party can deplete all the funds without the other person knowing. If that happens to a married couple, the divorce judge may require the ex-spouse reimburse the other, but this takes time. To prevent that, divorcing couples should contact their bank to explain the situation. With both partiesâ blessing, banks may offer to limit withdrawals to agreed-upon spending. Joint bank account holders who are not married will have fewer legal protections. Even if the relationship ends amicably, it may be tough to trace just how much each party is entitled to receive.
If you are a caregiver to an aging parent or family member with disabilities, beware if you opt for a joint account. Although joint bank accounts make it easier to manage their finances, joint ownership could jeopardize their ability to access need-based programs such as Medicaid, since both of your finances will be scrutinized.
Alternatives to joint bank accounts
Having a joint bank account may promote openness about financial matters among couples. Still, some people may prefer to have a personal account for expenses they donât want their partner to know about.
Financial caregivers for an elderly parent, relative, or someone with disabilities may want to consider getting signing authority, which gives them the ability to write checks to pay bills and care for the person financially. Adding a secondary signer can be more beneficial than becoming a joint owner in some situations, especially if they access need-based programs.
Another alternative to joint accounts is to link separate accounts, a process thatâs simple to set up using online banking. Couples can easily transfer funds between linked accounts, making it easier to reach savings goals and pay for household bills.
Joint bank accounts may encourage more financial openness between couples, since both parties will be able to see how much money is in the account and track withdrawals or deposits. A joint account can also bring couples closer as they discuss long-term financial goals. Talking about finances isnât easy, especially for new couples, but itâs critical in helping to mitigate conflicts.
If you decide to open a joint bank account, having discussions about money can go a long way toward easing the natural tension that exists when it comes to spending and saving. It can be an important way to strengthen your bond.
And thatâs what relationships are all about, right?
This article was most recently revised and updated by Debbie CarlsonThis article was most recently revised and updated by David Schepp
