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Opening a joint account
Joint accounts are best for people who are working towards a similar financial goal together.
Joint bank accounts look just like regular checking and savings accounts, but there’s one caveat — multiple people have equal access to the money in the account. This can be great if each account owner agrees on how to use the money, but it can also present some challenges. Here’s a cheat sheet on joint bank accounts, what they are and how they work.
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How do joint bank accounts work?
A joint account is any type of bank account that’s held in two or more names. Everyone named on the account has equal access to the money and can use the funds however they see fit. Although these accounts can be opened by any two people regardless of relationship, they’re generally used by family members, couples or business partners who trust each other.
Types of joint bank accounts
There are two main types of joint bank accounts:
- Rights of survivorship accounts. This type of joint bank account is most commonly used by couples and close family members. If one account owner dies, 100% of the funds go to the surviving account owners and the funds don’t pass through probate.
- Convenience accounts. This type of joint bank account is most commonly used by the elderly or incapacitated individuals who need someone to act on their behalf. There aren’t any rights to survivorship, so the money is divvied up according to the estate plan once the account owner dies.
How to set up a joint bank account
You can either set up the bank accounts where both people need to sign to withdraw or only one signature is necessary.
Both parties required to sign
If you would like peace of mind, this is a good option to ensure you know what is happening with the money at all times. This type of joint account requires both account holders to sign for the approval of a transaction for it to be performed. This is popular with business accounts.
However, you have to decide whether the added level of security is worth it and necessary. If you trust your partner implicitly, this may not be the best option as it can make the account difficult to access and less convenient. If you’re away and your partner needs money urgently, a withdrawal or payment can’t be made without your signature.
Either parties able to sign
For a joint account where either party can sign, anyone named on the account can perform a transaction on their own, without the knowledge or approval of the other person. But the level of security is lower, because anyone on the account can spend money without you knowing. But if you trust one another, it is certainly much easier for day-to-day living.Back to top
Who are joint bank accounts suitable for?
A joint bank account requires trust. If you’re thinking of opening an account with a roommate or someone you’re dating, think about the future and if you have similar goals. But also consider the past — do they have a history of bad financial choices?
Case study: Steve and Melissa
Steve and Melissa have been together five years and have decided to open a joint bank account. They have both changed their details with payroll so they can get their paychecks direct deposited into the account. Steve travels a lot for work, so he’s often away. The plan is that Melissa will handle any bill payments when Steve can’t be there.
They decide to open an ING DIRECT Orange Everyday Account online. Steve and Melissa both make small purchases like coffee or drinks at the bar. Neither minds the other spending as long as all the bills are paid and that they’re still saving their agreed amount each month.
Should I open a joint bank account with my partner?
If you’re in a long-term relationship and you trust your significant other, a joint bank account can be an excellent tool to help you manage your money effectively and achieve financial goals together. First, you won’t have to pay the fees twice. Second, drawing up a budget and sticking to it might be easier when you both pool your money together. Also, if one of you has to be away for an extended time frame, the other person can take care of all the financial aspects.
The key to a successful joint bank account is trust. It’s important that both account holders establish clear ground rules and that the lines of communication are not only open but used often. If you have even the smallest doubt about your partner, then don’t open a joint bank account and give them full access to your money. You could create a joint account where you deposit a limited amount of funds, while keeping your primary salary account separate and in your name only.
Should married couples have a joint bank account?
It depends. Marriage represents the merging of two lives, which often means the combining of finances. This can simplify your financial picture and make it easier to pay bills and save up for financial goals. But just because you tie the knot doesn’t mean you have to open a joint bank account. If you and your spouse aren’t on the same page financially, you may be better off keeping your accounts separate and opening one shared account where you deposit money for bills and other routine payments.
If you decide to open a joint bank account with your spouse, keep the lines of communication open at all times. Discuss your saving and spending expectations beforehand, so you can minimize any potential disagreements that could arise.
Should I open a joint bank account with my child?
Opening a joint bank account with your child can be a great way to monitor their account activity and help them develop basic money management skills. If you want your child to have access to their money now, you can open up a regular joint checking or savings account at any bank or credit union. Or, you could find one that’s targeted toward those under age 18.
If you want to save money for your child to use later on — say when they turn 18 or are in college — look into a custodial account. These are often referred to as UGMA or UTMA accounts. The parent controls the account while the child is a minor, but it becomes the child’s account once they turn 18. At that point, they can use the funds however they wish.Back to top
How do I compare joint bank accounts?
As with any bank account, you’ll want to find a bank that offers joint accounts with as few fees as possible. In fact, it’s preferable to find one that won’t charge you transaction fees, will give you easy access to your funds and will offer a reasonably good interest rate on the funds you have in your account.
The majority of banks will let you fill out your application online, saving you time and the work of coordinating a face-to-face meeting with bank.
What are the pros and cons to opening a joint bank account?
- Save together. Good for couples that have joint financial goals and share spending and saving habits.
- Less fees. Save on fees with only one bank account.
- Full transparency. Since you’re both on the account, you’re always able to see how the other is spending and where.
- Easier to pay and schedule bills. With all the money in one place, it’s a lot easier for couples to manage personal finances and bills.
- Complete access all money. If you opt for a joint bank account where both of you can withdraw money freely, be sure to discuss large or unnecessary purchases.
- Splitting up. If there’s a break up, both of you have access to the account. You may hope you could amicably split the funds, but in the case of a dispute, court can be a long and arduous process.
- Complete transparency. This is a double-edged sword; while you have complete transparency, you may lose some of your financial privacy.
Joint bank accounts can also lead to trouble…what can go wrong?
If you value your independence and financial privacy, you may chose to manage your own money rather than a joint account.
It’s critical that partners and couples are completely open about their spending habits. If one person is committed to saving, and the other can’t keep their spending under control, there are bound to be issues. Furthermore, some couples are hesitant to open a joint bank account because things can get complicated if they separate — it’s important to agree on a strategy for this prior to opening a joint account.
You need to be careful if someone is trying to push you into opening a joint bank account. Someone who might have money problems could see you as the answer to their prayers. Things you could hear include: “don’t you trust me?”, “it means you don’t love me” or “what do you think I’m going to do? Run off with your money?” These are all a form of emotional blackmail, and there could be a reason they are so eager to share finances.
The other person’s financial status should be clear prior to opening an account together — you don’t want to take on someone else’s debt. This is especially true about joint bank accounts that offer credit. Your partner could rack up a huge amount of debt they can’t pay back and then you both are stuck with a poor credit history. Furthermore, you are just as responsible in the eyes of the law for paying back the loan as the person who actually spent the money.
Joint bank accounts after divorce
If you close out your joint account or withdraw a large sum of money during a divorce, a judge could require you to return the funds. That’s why most lawyers recommend not doing anything drastic with joint accounts until the divorce is final and a plan has been made.
Joint accounts are a mess to separate after divorce. Each spouse is typically entitled to 50% of the account balance, but this isn’t always the case. If one person has bank statements proving they entered the marriage with more money, they could leave with more than half of the funds.Back to top
What to ask yourselves before opening a joint bank account
Do you pool your expenses together?
Do you both use the same budget and consider your costs as shared expenses rather than individual expenses? If all you have is shared expenses, then it is logical to have a joint bank account.
Do you both spend money the same way?
Are you both financially responsible? Will one strive to save while the other empties the account? If this is the case, you’re better off either keeping things separate or opening a joint account where both of you have to sign for each transaction.
Are you comfortable with the idea of opening a joint bank account?
You might save a few dollars on fees, but if you aren’t really all that happy about the idea, then don’t do it.
Is the trust there?
Believing your partner will be financially responsible at all times, even if things get tough, is essential. If the trust isn’t there, you are better off keeping things separate.
Are the lines of communication open?
Is talking about money issues uncomfortable? If you have communication problems surrounding money and you feel you need to hold back your opinion, then you’re better off avoiding a joint account.
Are the financial goals the same?
Confirm that you’re working toward the same financial goals. This includes short term goals such as an overseas trip and long term goals like buying a house. If you’re not on the same page, a joint account will be less likely to work.
What is the goal of opening a joint bank account?
Figure out exactly why you should open an account and see if there are other ways to get there. If you want to save money on fees, for example, consider whether the few dollars are really worth the worry. You could simply shop around to find an account with lower fees instead.
How to open a joint bank account
Opening a joint bank account with someone else looks a lot like opening a regular checking or savings account on your own.
- Shop around for bank accounts until you find one that suits your needs and supports joint accounts.
- Apply for the account either online, by phone or in-person at a local branch. Be sure to check the box that states you’re opening a joint account.
- Verify your identity, as well as the identity of anyone else on the account.
- Fund the account by making your initial deposit.
- Start using your account by setting up direct deposits, scheduling automatic savings transfers, paying bills and more.
Everyone listed on the account should have the following information on hand before you start the application process:
- Full name
- US residential address
- Date of birth
- Social Security number or Taxpayer Identification number
- Government-issued photo ID
Decided to open a joint account? Here are some tips for couples.
Communication is key
If you’ve decided to take the plunge and open a joint bank account with your partner, make sure you talk about these important issues in advance:
- How will spending be managed?
- How will bills be managed? How much and who’s responsible?
- Are there financial issues that need to be dealt with prior to opening a joint account?
- What to do about financial obligations from the past, like child support, loans or other legal fees?
- If one party earns a higher salary, will they be allowed to spend more?
Then, you’ll have to decide which accounts will be set up as joint accounts and which will remain separate. For example, some couples choose to pool their savings in a joint account while their everyday accounts remain separate. Other couples opt to separate ownership of property, such as their homes, especially when it was purchased before the relationship began.
Work out a budget
To make life easier, put together a monthly budget. Write down all your expenditures for a week, which allows you to see where the money is going and if there are areas you can cut back to save some money. Then, decide on a budget. The key is not to be too strict and make sure to give yourselves some ‘play’ money. Also, check in regularly to make sure that you’re on track with your budget, and address anything that needs changing or that isn’t working.
Maintain steady savings
No matter how hard we strive to avoid problems, it’s best that you make a plan for emergencies. This could be anything from unemployment or illness to an accident or car issues. It’s essential to have some money set aside. A savings account could be useful in such situations as well as ensuring that you have available credit.
Remember your financial goals
By establishing your joint financial goals, you’ll find it a lot easier to save when you’re both working towards the same objective. Check in periodically to be sure you’re both on the right track.
Joint bank accounts can be a good idea but only if you and your partner have the same financial goals and spending habits. If you’re simply opening the account for the sake of convenience, remember that there are other options that can provide the same level of convenience without the risk. However, if the trust is there, a joint bank account can make life easier, especially when you’re working together to achieve certain financial goals.
Common questions about joint accounts
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