Top Concerns When Opening A Joint Bank Account
Married couples, couples that live together, and aging parents often ask themselves if it would be easier to have a joint bank account. For instances like paying bills and utilities, it can be a great way to simplify things. However, before taking the plunge, everyone should weigh the pros and the cons of opening a joint account.
How it Can Be Beneficial
For couples, this can set them up to have a greater awareness of their own financial situation and avoid unexpected surprises. With both people on the account, each person has access to account activity and can improve their ability to refrain from buying splurges. In doing so, it can make it easier for couples to stay on track when attempting to achieve certain financial goals.
For aging couples, it can mean avoiding a long legal battle. If your spouse or parent passes away, you can have access to the money in a joint account immediately. If you keep your accounts separate, you are going to have to refer to a will and go through a lengthy legal process to get your hands on the money.
Other pros of having a joint account as described by the article “Joint Bank Accounts: How and When They Work,” include both account holders being insured up to $250,000 by FDIC or NCUA insurance coverage, and the ability of adult children to monitor their aging parent’s expenses.
How it Can Lead to Headaches
Recently married couples that have a joint bank account may run into certain problems. If they do not communicate effectively with each other about their account activity, this can lead to arguments over someone’s spending habits. Moreover, if one spouse enters into the marriage with unpaid debts, the account can be used to settle these debts, even if the majority of the money does not belong to the person with the debt.
Another issue that can arise is how to close the account if the relationship ends. Since both people have access to the account, either one can drain the money completely. Although this is the worst-case scenario, deciding how to close the account civilly will be a stressful situation regardless.
And finally, some parents may decide to open an account with one of their children. This can help you monitor their spending more effectively but can become detrimental if they become too reliant on you to replenish the account. Moreover, as they get older, they will want more independence, which can put unnecessary strain on your relationship.
The Freedom of Separate Accounts
For couples that aren’t married or are early in their relationship, retaining separate bank accounts may be the best option. As your parents age, or you grow older with your spouse, joint bank accounts may make more sense. Really think deeply about your situation and go into the creation of this account with maximum transparency. Communication and knowing each other’s current financial standing is crucial to the success of maintaining a joint account.