There are several ways you and your spouse or partner can handle your finances. One of these is opening a joint account. Many couples decide to combine some portion of their money into a single pot. This makes it easier to pay bills and household expenses and to contribute to savings. In addition, by withdrawing from a single bank account, you’ll have a better sense of your household expenses, making it easier to budget each year. It’s essential to keep in mind that both of you will have access to the joint bank account, unlike a private account. Here are seven things to consider when opening a joint account.
1. Do You Have the Same Financial Goals?
Before opening a joint account, you should sit down and map out your financial goals. Are you on the same page? For instance,
- Do you both want to buy a home?
- Or take vacations?
- Do you both prioritize the importance of saving for retirement and emergencies?
- Have you established a household budget?
Each of you can dip into the joint account without permission from the other. If you haven’t agreed upon a clear outline of your financial priorities, one of you could splurge on non-essentials. You can quickly find yourselves fighting over money.
2. Do You Have the Same Relationship With Money?
For some people, money is a stressful topic. One of you may have grown up in a home where money was tight. As a result, you may have experienced constant stress over money. Or the reverse could be the case. A joint account requires you to communicate with each other constantly. If you want to spend money on something not in the budget, you need to discuss it first. Are you both comfortable talking about money?
3. How is Your Credit History?
If one of you has a poor credit score due to unpaid bills or defaults on loans, you might want to reconsider opening a joint account. If the person’s adverse credit history is due to circumstances beyond their control, then combining your money might be okay. But poor credit could also represent an inability to manage money or carelessness about financial responsibility.
4. Are There Pre-existing Financial Obligations?
If this is not the first marriage, there could be financial obligations to the previous spouse, such as child or spousal support. Be clear about financial commitments to children from an earlier marriage, such as school tuition and other promised expenses. You both need to agree to carry the burden, or one of you might become resentful that you are using your joint funds in this way.
5. Be Clear About the Risks
A key thing to consider when opening a joint bank account is the risk involved. If one of you causes a deficit in the account, you will both be responsible. Repeated overdrafts could negatively impact your credit score and relationship with the bank.
6. Two Signatures or One?
A joint banking account can require one or two signatures on all transactions. Suppose you’re opening a joint account with someone other than a spouse, partner, or family member. In that case, you might want to set it up so that both signatures are required on all transactions. Requiring both signatures could cause a delay if one of you is out of town. Still, it provides a higher level of security, especially if the joint owner is not a family member.
7. Shop Around and Compare Terms
Once you’ve decided to open a joint bank account, it’s time to shop around to find the best terms. All banks are not the same. Investigate interest rates, fees, ATM usage, balance requirements, digital access, and other factors that impact your money.
A joint account can simplify your financial life and, in the case of partners, can bring you closer together. Before jumping in, be sure it’s the right step for both of you.