Once the honeymoon is over, or at the very least, the thrill of a healthy new relationship has settled into blissful co-existence, there’s one topic that can certainly put a damper on things. Yep, you guessed it—money, and how to handle it as a unit.
One question that invariably comes up is whether or not to share, or keep things separate. Those opting to pool their money as a unit use something called a joint bank account, and that begs the question: when is it considered a good idea for married couples to utilize joint bank accounts?
Well, there are numerous benefits to this type of account for married couples and for significant others, as well as for people in other types of close relationships. There are, however, also a few things to carefully consider before you open a joint account with someone. So, in this post, we’ll share both the pros and cons so you can make the right decision for your specific situation.
Plus, we’ll also describe a middle-of-the-road approach, one where you have some joint accounts while also still keeping some in your name only—and then we’ll share one of the smart ways to save your money, a flexible choice that can help you to get the most out of the money you save.
Benefits of Having a Joint Bank Account
If you’re in a situation where you share financial goals with someone, whether that’s a spouse, a partner or someone else with whom you have a close relationship, it can be helpful to share a joint account where you pool together your savings. Maybe, for example, you and your sibling have long wanted to go to Hawaii together and so you decide to open a joint account and each contribute monthly to reach your dream.
A joint account could also be helpful if you’ve bought a house with a partner and you want to put all of the money needed for your mortgage payments, utilities, house insurance and the like into a checking account specifically earmarked for that purpose.
If you pay all of your house-related expenses from one joint account, each of you has visibility into how much was deposited and how much was spent, along with when it happened.
This allows you to create a system of checks and balances, really, where you both can see that the money put aside for a particular purpose was really used that way. Plus, it’s typically more convenient. It’s simpler. It’s more streamlined.
Here’s yet another situation where a joint bank account can make good sense. Let’s say you have an aging parent who isn’t as mobile as he or she used to be, so you’ve taken on significant amounts of tasks for that parent, including paying his or her monthly bills. In that case, you may find that having your name on their account is quite helpful, especially if you need to ask questions at the bank about an issue.
There are other potential benefits to opening a joint account, including that your combined resources might allow you to open an account where a certain balance is needed to open it or to keep it free from fees.
Or you might get a higher interest rate or other rewards through a pooling of financial resources, rewards you may not have been eligible for by yourself. Plus, a joint account can create a sense of teamwork, of togetherness, that separate accounts could never do.
Challenges with Having a Joint Bank Account
When you open an account jointly with another person, you typically have the ability to withdraw funds without the other person’s signature or consent. And, this means you could withdraw all of the funds, not just half of them, and receive information from the bank about any activity on the account, including what the other person did.
You could close the account. More concerning to you, most likely, is that the other person on the joint account could also withdraw funds and receive information from the bank about any and all activity related to this account. This other person could close also the account and keep all the money.
So, opening this kind of account with someone else requires a level of trust. You could, of course, talk to the bank about requiring both signatures for withdrawals, but that could quickly become a big hassle.
Another con of having a joint account (or at least of not having your own separate account in addition to a joint one) is that it’s hard to surprise the other person with a gift. This is one of those things that may not seems like a big deal—until it becomes one.
How to Open a Joint Bank Account
Opening this type of account is very similar to opening one for yourself, except that all parties involved will need to provide the bank with personal information and identification. You will need to make decisions together about how you want this account set up, managed and monitored, including who gets account alerts and so forth.
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Money, Love (and Joint Bank Accounts!)
On Valentine’s Day in 2018, we reported on how money affected people in love relationships, and insights were quite interesting. More specifically, we surveyed more than 3,300 couples in the United States, ages 18-45, delving into which money-related topics were causing even otherwise communicative partners to not talk about the subject. Insights include:
• One in ten people surveyed admitted they had a secret bank account their partner didn’t know about.
• 14% of them said they’d snooped into their partners’ finances.
• Nearly 30% would rather have a partner cheat on them romantically than to have them ruin their credit score!
• 42% of people surveyed hadn’t been honest about how much something cost, lying to their partners to avoid conflict. Out of that number, though, 77% were being less than honest about smaller purchases, something that cost $250 or less.
• More than one third were more willing to share their cell phone passwords to a partner than to discuss details about their debt.
Fortunately, there’s some good news, too. Out of the couples that do talk about money with one another, more than 83% say they don’t regret sharing finances with their partners.
Combining Finances: Should We Get a Joint Bank Account?
What’s important, really, is that each party is in agreement with how the bank accounts are set up. If you’re both happy and it’s working well, then it’s probably the right choice for you. If it’s not, then it may be time to reevaluate.
SoFi has created a resource to help you decide if you want to combine finances and, if so, how. If you keep your finances completely separate, you could simply decide which person pays what expenses (perhaps divided 50/50 or based on income) and then otherwise manage your money separately.
This is a streamlined approach, but it can get challenging to track how you’re doing with accomplishing joint goals and to make sure each person is paying agreed-upon expenses. In general, if you combine finances (like combining bank accounts), you could do so completely or use a combination strategy where you combine some finances but also keep some separate.
Most couples nowadays have joint accounts but keep personal ones, too. This can be a best of both worlds approach for many couples because you can get a sense of teamwork while still keeping some financial independence.
This, of course, means you’ll likely have more accounts, which can complicate your financial management somewhat, with more passwords, account numbers and so forth to remember.
Or, you could completely combine finances (other than retirement accounts that must be separate). This gives you the smallest number of accounts to manage and gives you the clearest picture of your finances.
When this is newly done, it may feel more limiting, and it may feel strange to know how your partner can now see every single banking transaction you make. At first, it may be easier to overdraft an account because you didn’t know what the other one was spending, so it’s a good idea to communicate frequently, especially at the beginning.
If you’re not sure what path to take, honestly discern if you feel 100% comfortable giving your partner 100% visibility into your bank accounts. If so, then joint accounts may make the most sense. If the answer isn’t a wholehearted yes, then choosing one of the other two routes (having all separate accounts or a combo) is likely to be the better choice.
Before making any decisions, talk with your partner about what you already share. How is that going and what changes would need to be made for you to be okay with sharing an account? Then, dive into your financial goals.
What goals are you saving for? Are you on track? Do you have any debt that needs to be paid off? This could include student loans, credit card debt, car payments etc. Then talk about both the pros and cons of having a joint account together.
From these conversations, you should be able to determine which financial strategy will work best for the both of you. For some a joint account is a great idea, for others, keeping finances separate might do the trick.
Choosing the Right Account
Whether you ultimately decide on opening a joint account, keeping all separate, or doing something in between, it’s important to choose the best account for your needs.
And, we’d like to invite you to check out SoFi Money®, a cash management account where you can earn, save, and spend, all one. There are no account fees and you can use any ATM in the world that accepts Mastercard® and we’ll reimburse all of your ATM fees (subject to change).
SoFi Money offers joint cash management accounts so that you can share an account with your partner, family member, or loved one. Both account holders will have equal access and control over the account.
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