When a couple get married or choose to live together, it’s traditional for them to set up a joint bank account. Merging the financial side of their lives means taking shared responsibility for paying bills and saving. But it’s a tradition that may not work for everyone.
Interestingly, many couples now choose to share a bank account but keep some of their finances separate. “Talking about money can be uncomfortable and many people are eager to keep some sense of financial independence from their partner” says Credit Angel, who recently talked about the benefits of marriage, (including financial) on their blog.
If you’re about to embark on the next step of your relationship, whether that be moving in together or getting wed, then discussing how to manage your finances should be a top priority.
Here, we look at the pros and cons of joint bank accounts.
What exactly is a joint bank account?
A joint bank account works in the same way as an individual account, except that you both have access. Holders can both view and make transactions, which means you both track how much money is being spent (or saved).
Joint bank accounts are easy enough to set up. Both parties need to complete an application form with proof of address and identity and both will receive a bank card.
A joint bank account is a convenient approach to managing joint financial responsibilities. It makes it easier to;
1) Pay joint bills such as water rates, electric and gas bills and council tax.
2) Pay the mortgage or rent.
3) Share the cost of other expenses such as food, household goods and entertainment.
You can also potentially earn more interest, because a joint account is likely to have more in it at any one time than your sole account.
If you or your partner passed away or had a critical illness, the other would still have access to the money in that account without having to go through a lawyer or refer to a will.
It can be easier to keep track of your expenses when they are all coming and going out of one account.
1) As both parties have access to the account, either one could empty it without needing the permission or knowledge of the other.
2) Any overdraft is the responsibility of both parties, therefore, even if you did not run up the debt, you are still liable.
3) If the relationship breaks down it may be difficult to get hold of your money or separate the funds.
4) You could feel a loss of financial independence.
5) Problems can arise if one partner is not communicating their usage of the account, or using it to pay for personal debts or loans.
6) If you have multiple accounts with one bank, they can legally transfer money from another of your accounts to cover any debt within a joint account.
A bit of both
Many couples nowadays opt for both a joint account and an individual account. A joint account accommodates all the shared financial responsibilities and a set amount of money from each person is transferred to that account each month. But each person still has their own account, into which their wages are paid, and their own funds and savings remain.
This is decidedly a more modern approach, giving people convenience, financial independence and a safety net for if the relationship turns sour.
Mum’s the word
A study from 2016 by TD Bank stated that 76% of people share a least one bank account, but that 48% also have a secret bank account. So, no matter how loved up we are, it seems we still like to have that safety net in case something goes wrong. And many of us do it in secret!
Saying “I Do”
So now you have a good idea of some of the pros and cons of having a joint bank account. Talking with your partner about your financial attitudes and goals should be at the top of your list, before any decisions are made in haste. Having different views doesn’t spell disaster for your relationship. It’s perfectly possible to retain your financial independence while also sharing the financial responsibilities of a partnership.