Joint Banking Accounts – Are They Worth It?

Valentine’s Day has it all wrong, roses and jewellery aren’t the ultimate signs of love; opening joint accounts are. What better way to say “I love you and trust you,” than by opening a joint account and sharing your finances. If you are, in a relationship, living together, married or business partners, opening a joint account has probably come up in conversation before. It’s a big decision that you must be certain about. Opening a joint account doesn’t just open you up to the benefits of having combined savings with someone else, it also sets you up for the drawbacks and debts that the other person may have too.

What is a Joint Account?

A Joint account can be a transactional account with which, two or more people have authority for depositing, transferring and withdrawing funds. All account owners have access to the funds, and all account owners can operate independently in terms of what gets deposited and what happens to the money. If it is a shared ‘Everyday’ transactional account, you and everyone else who shares the joint account will have access to the funds.

Why Would You Want a Joint Account?

Joint accounts can be beneficial when you and another person are jointly liable for financial responsibilities or if you both have a combined financial goal. You and your spouse may be renting together, and you may have a joint account for bills. You might also have a joint savings account which you both make regular deposits into. A joint account is beneficial when it comes to managing your funds with someone you know since it creates transparency and trust within the relationship.

The Benefits of Having a Joint Account

  • Pooled savings: Regular contributions can mean more interest is earned and also a more straight forward picture of your current combined financial situation is painted.
  • Transparency and trust: The joint account holders can track each other’s spending and financial habits.
  • Money Management: Easier to pay and schedule bills that you’ll may be jointly liable for.
  • Passing on of Estate: If your partner who you share a joint account with passes away, you are eligible to their contributions in the account, without having to go through legal processes.

Why You Have to Think Carefully About Joint Accounts

Having a joint account at first might seem fine and dandy, but it opens you up to a lot of potential financial dangers. Joint account holders with must be in complete cohesion as differing financial habits can cause problems in relationships. A frugal individual who only purchases necessities might have different plans with a joint account than that of an outgoing party goer who also likes to buy coffee and takeaways every day. Failing to communicate or failing to be transparent beforehand, could spell disaster down the track.

The Negatives of Having a Joint Account

  • Everyone has access to the money: Joint account holders may have different income levels and therefore contribute differently to the joint account.
    • You need to be upfront from the start and agree on some rules with the funds. Recognise potential financial differences and set an acceptable contributing and spending amount.
  • Transparency and trust: It works both ways as some financially independent individuals may attempt to keep some finances secret in their accounts, causing them to lie about their spending or their capability to contribute.
    • Once again, communication is vital. You have to arrange with your partner, what the account is to be used for and let them know if you wish to keep certain funds/spending separate.
  • Financial liability: If you and your partner take on debt together, then you are both liable for the debt until it is completely repaid. Even if you and your partner split up before the debt is repaid, and he/she is incapable of paying, you must cover the full payment amount.
    • Having a joint application when borrowing can be a great way of increasing the chance of approval, but it also sets you up for complete liability if something goes wrong. You need to completely trust the person you are co-signing with if you wouldn’t trust them with your credit card, then co-signing on another form of debt might not be a great idea.
  • Tensions with spending: Having a joint account and having a partner control your spending could create tension in the relationship as it becomes apparent that your partner doesn’t trust you. Additionally, having a joint account with someone who is unfairly spending the money you contributed, could create tensions too.
    • You and your partner should speak openly about their spending habits. Don’t rush into opening a joint account with someone when you don’t know how financially sound they are.
  • Breakups: It’s something we all don’t want to think about, but not all relationships last. Having a joint account with someone during a terrible breakup can create complications when both of you have access to the money.
    • The potential for a relationship to turn toxic is why it is sometimes best to have only funds for regular expenses in the transactional account. Ensure the savings account requires joint signatures to withdraw from.

Do You Really Need a Joint Account?

There are several risks involved with opening a joint account, and you might be sitting there asking yourself, “Are they even worth it?” A joint account offers convenience when you are settling into long term plans with another person. Although not necessary, joint accounts can create comfort in relationships as it shows your intention of sharing everything with your partner. You, however, can achieve similar effects by being transparent with your finances and speaking openly about them with your partner.

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