The desire to share everything with your partner may arise when you’re in a committed relationship. The same may apply to your finances. Thus, one of the critical questions that any couple who has been together for a while must decide to ask is: Should you open a joint bank account?
Every couple’s response will undoubtedly be different. To help you decide what might be best for you, this article details the pros and cons of joint bank accounts and what it entails.
What Is a Joint Bank Account?
Multiple people can own a joint bank account, which functions like a personal checking or savings account. Owners of the account could be business partners, spouses, friends, or even parents opening a bank account for a teen headed to college. The same rights apply to all account holders, including the ability to write checks or use a debit card to make purchases or withdrawals.
In joint accounts, each account holder has an equal ownership interest in the account’s assets. Anyone can make a deposit or withdrawal at any moment without the consent of another account holder.
If one of the account owners passes away, the funds in the account won’t need to go through probate. Instead, the money and ownership of the account are transferred straight to the other account holder(s). To transfer ownership of the assets, it’s crucial to remember that the surviving account owner might need to give the bank a copy of the deceased account owner’s death certificate.
How Do Joint Accounts Work?
A joint bank account functions similarly to an individual bank account, except that a joint account contains two or more owners who each possess an equal share of the account.
Joint bank accounts are typically something that married couples have. However, anyone can be a joint account owner, including spouses, business partners, siblings, or friends.
You and the other joint account holder must submit specific paperwork to the bank where you’ve decided to open the account to open any joint account. A valid government-issued ID must be shown by each applicant (such as a passport, driver’s license, state-issued ID card, or social security card) before the bank can set up a joint account.
Pros of Having a Joint Bank Accounts
The main advantage of a shared bank account is that sometimes having two or more people manage the account is preferable to having just one. You may benefit in different ways from having a joint bank account:
- Easier to pay bills: It’s much easier to write a check that will be drawn from a joint account when you’re splitting rent and utilities. The same holds for other bills, such as auto and insurance premiums. You don’t have to be perturbed about who will pay for dinner or groceries when you share the money; you both are. A joint account has the extra benefit of possibly making it easier for you to maintain the minimum balance required by your bank to avoid penalties and receive better interest rates on your money since there are multiple account holders.
- Easier legal process: You won’t need to go through a complex legal process to obtain your partner’s money in the terrible event that they pass away. This means that one less issue would be on your mind at such a difficult and depressing time.
- Transparent expense transactions: There are no surprises with online banking. You can track every dollar that leaves your account. This can help you and your partner understand exactly what you are spending your money on, making it easier to balance your checkbooks and file taxes. This will also be beneficial in the future when making plans and setting aside money for more significant expenses.
- A sense of togetherness: A joint account denotes a high level of trust, which explains why some people do it with their spouses, friends, or business partners. Combining costs and income in the same account appears exciting as you and your partner get to know one another better. If handled properly, it can strengthen your relationship even further.
- Parents and their kids: Joint bank accounts might aid parents in forming good financial habits in their kids. With joint bank accounts, parents can keep an eye on transactions and spending patterns while teaching youngsters how to handle checks and debit cards. Joint bank accounts might speed up fund transfers for unforeseen needs for parents of college-age children.
Cons of Having a Joint Bank Account
Some beneficial features of joint bank accounts may, in some cases, become complicated. It would help if you kept the following scenarios in mind as you decide whether a joint bank account is the best option for you:
- Paying your partner’s debt: You must be willing to let your partner use your joint account to pay for their debts now that your accounts have been combined. Additionally, if you earn more money than your partner, you must be okay with paying some of their debt out of your pocket. Therefore, make sure you discuss such obligations openly with your partner.
- Lack of spending control: You do not influence how the other person uses your money. Both of you will suffer if your partner chooses to spend carelessly. Arguments about what expenses are required and which are not might result from this issue. If one party earns more than the other, then more of these problems might surface.
- No privacy: The downside of disclosing your spending habits is losing your right to privacy. You can’t choose to pay for a trip on your own to surprise your spouse anymore. As soon as you made the transaction, they would receive a notification, and your cover would be compromised.
Bottom Line
These are just some general guidelines to help you decide if a joint account is the right choice for you, so don’t take them as gospel. Remain open and honest with your co-account holder throughout your decision-making process about whether having a joint account is the right move. This is the only way to decide what is best for the two of you.
