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It is often assumed that a married couple will have a joint bank account. After all, the money belongs to both spouses equally, regardless of who earns it. A joint account enables both parties to see what is going on in the account and manage their money together.
However, there are times when it is better not to have joint accounts, but it does depend on many factors. There is no one right way.
Money And Marriage 101
It is good to get some solid financial-based marriage advice before taking the plunge. The engagement ring is only the first of many big expenses. When considering money management just before and after marriage, there are some basic questions that you may want to ask. One popular question…
What about opening a joint bank account?
Answer: Since all your money will in essence be merged, opening a joint bank account can make paying bills much simpler. This is particularly true of bills for things that you own and share as a married couple, such as a house or insurance. However, it is also a good idea to budget some spending money to put into your own personal accounts.
What Is a Joint Account?
A joint account is a good option for those individuals who want or need more than one person authorized to use a bank account. When you open a new checking or savings account at a bank or credit union only your name will appear on the account. This is fine for some people, but there are others, especially married couples, who need more than that one name on the account.
For those individuals, a joint account is a way to go.
A joint account does not have to be limited to married couples. Many businesses will use a joint account. Elderly parents may wish to open a joint account with their adult children in order to pay bills or to avoid probate court after death.
Once a joint account has been opened, any person listed on the account may make deposits into the account; they may write checks on the account and they can withdraw money from the account. In some cases, however, the joint account can be restricted so that it takes two signatures on checks or withdrawal slips before the money is released.
This is usually done to avoid secret or illegal withdrawals from the account.
An important issue about joint accounts is that of the right of survivorship. What this means is that if two people open a joint account and one dies, the other party is usually entitled to the remaining balance of that account without having to go to probate court in order to get it.
This may not be the case with other types of accounts that may be subject to probate court restrictions. Those types of accounts can keep the money in probate or escrow (which means you cannot use it) for years.
Let us now explore the advantages of establishing a joint bank account.
Advantages Of Joint Bank Accounts
A joint account not only demonstrates confidence but also contributes to transparency, which individual bank accounts cannot. Each partner can monitor the amount of money coming in and going out because they both share accountability for the same account.
Only One Fee
Most bank accounts come with fees these days. Cutting down on fees is a good financial strategy. If you have enough money to keep more than one account, it might make sense to have separate accounts so that each person is responsible and accountable for their own actions and choices.
Makes Accounting Easier
If it is all in one place, it is a lot easier to keep track of since either of you can access the accounts. You will know at a glance what savings you have, your investments, and the balance in your checking account.
Everything in One Place
If all your money is in one place, it is harder to hide problems. If one spouse is prone to doing that, having a joint account that both can see alerts to and balances in can help.
There is no hiding anything if you have a joint account. This means that it can promote trust since there are no private expenditures when you have only joint accounts.
Disadvantages Of Joint Bank Accounts
If one partner has a poor credit history, it’s not usually a good idea to open a joint account. Plus, the fact that other account holders can spend your money without your knowledge or agreement can lead to disagreements.
Below are several more cons of having a joint bank account:
One Party Has Issues
If one party has serious issues with keeping track of a bank account, having a joint account can lead to added stress. It might be simpler to let the partner who is not good at keeping track keep a separate account to avoid issues paying bills.
Not Creating a Credit Path for Both Spouses
In some instances, especially if you have a nonworking spouse, it can make it hard for that spouse to build their credit record. Having a credit record may come in handy should something happen to the main working spouse.
Another important issue to consider before agreeing to a joint account is that creditors look at joint accounts the same way they do individual accounts. What this means is that they will be able to deduct money from the account even if you did not default with them.
More Ammunition for Fighting
Having joint accounts when parties are not on the same page can create fodder for fighting with each other about the spending happening. For this reason, sometimes having separate accounts can help.
Having only joint accounts can make it hard for spouses to buy gifts, plan surprises, or do things that they want to do without judgment from the other spouse. That’s why there should always be some fun money for each spouse to spend on whatever they want.
Final Thoughts on Joint Bank Accounts
For married couples, there are some occasions when having two individual accounts is preferable to a joint account. This can be especially important if one party has a lot of outstanding debt and may be at risk of liens on his or her bank account. Joint accounts work best only when they are set up with those who trust you and with whom you trust.
Nonetheless, whether you choose to have separate accounts or joint accounts, you can still accomplish your financial goals. There is no one right way to achieve your goals. Each couple must figure out for themselves what works best for them. Most of the time a compromise and division of responsibilities is the answer.
A joint account for joint bills and separate accounts for personal spending money that you have agreed upon may be prudent!
Related Article: Should Couples Have Separate Bank Accounts?