1 Account : 2 Names
Opening a joint account with your new partner is a huge commitment and one of the biggest decisions you will have to make in that early 'commitment' part of your relationship. BUT: Be warned! Only do this if you completely trust them to responsibly access the money, in good times and not so good.
Here are some questions to ask to help you work out whether a joint account is right for you and we'll further discuss each point below.
1. What are the Risks of joint accounts?
2. What are the Benefits of joint accounts?
3. What are some Types of joint accounts?
What are the Risks of joint accounts?
It's never a good idea to open a joint account with someone you've met only recently as you are giving them access to your money. Plain and simple! Joint accounts are really only suitable for people who trust each other - based on long experience, like a family member or life partner. I'm sure we've all heard the story of someone's lovely partner who has 'cleaned them out,' called it Splitsville and hit the road! Maybe you've already been the victim of this - and can vouch that it's not a great feeling! Let alone good for your lifestyle!
And for some relationship advice thrown in: Be very wary of anyone who is pressuring you to open a joint account. A lot of people do have money troubles and may see you as the ticket to help solve their financial problems. I'm sure you'll agree… this may just not be what you signed up for!
If you do decide to open a joint account which also offers credit and your beloved racks up a huge amount of debt that they're unable to pay back, you both risk having a bad entry on your credit rating. And to make it worse: you are legally responsible for paying off the debt - whether you spent up big or not!
Not scared off yet? So…
What are the Benefits of joint accounts?
One of the main reasons people open a joint account is because they pay fewer fees on one account than two individual accounts. It can also make joint payments for expenses such as the mortgage or rent or other shared bills much easier to manage.
Joint accounts work very well for people who spend money in a similar way. Both of you need to agree how and when they will deposit and withdraw money, and be prepared to set and to meet the same goals. And most families happily operate this way for years.
If you are thinking about a joint account, ask yourself the following questions:
Do I trust the other person completely even if times are tough?
What is their history like with former partners with money?
Do we communicate well about money? Have we in the past?
Do we have similar goals for the money and similar spending habits?
What is our objective in opening a joint account? Is there a better way to achieve this?
What are some Types of joint accounts?
A shared account for shared bills
One way to make things more convenient for you both at the start, may be to keep your money in your own existing and separate accounts but open one shared account for your joint expenses. Discuss what bills you will pay with your shared account and how much you each will put in per week or pay period to cover these debts only. The rest is maintained by you completely independently of the shared account. This is just one way to never 'lose your shirt!'
There are two main styles of joint accounts.
1. Both to sign
This type of account only allows transactions only to be made if both parties sign for any withdrawals i.e. if you don't agree that your partner should spend money from the shared account on a new set of wheels, then they wouldn't be able to access the joint funds without your agreement.
If you do have a security concern, but want a joint account this is probably the best option for you. So even if you set up a direct debit for the Mortgage, both of you will need to sign for the direct debit authority to allow this to happen.
2. Either to sign
This account allows both parties to transact independently of each other. This is a much less secure option because one person can withdraw and use the money without the approval or knowledge of the other. However, it also allows more flexibility as well.
These are often the first accounts to be cleaned out by a vindictive partner when it comes time to split - and they're legally allowed to do it!
Additional credit cards on your account
Your credit card provider may also offer you the option of having additional cards for family members or partners tied to your main credit card.
These are not strictly joint accounts and the primary credit card holder is often solely liable for the debt. Again - think carefully before allowing a second card to be attached to your account - or keep the credit limit low enough so that you can't get into too much trouble!
To sum up: Think very carefully before opening a joint account. Communicate openly with the other person to make sure you both have the same financial goals before you enter into this. Do NOT allow anyone to pressure you into opening a joint account as you could lose your money!