Having a long-term relationship can create a lot of happiness and stability. Bringing two people underneath one roof, however, does have some complications that need to be addressed. Some of those issues involve money. Should you bring your money together when you get married or live together for a long period of time? Or should you keep it separated?Here are the pros and cons of joint bank accounts to consider when you’re wondering what to do with your cash as a couple.
What Are the Pros of Joint Bank Accounts?
1. It keeps your account fees to a minimum.
If you have two bank accounts that run concurrently with one another, then there’s a good chance you’ll be paying double fees. Combining them into a joint bank account will allow you to have the same access to your money while only paying one set of fees for what you need.
2. You may be able to increase the amount of interest earned.
Although interest rates are relatively low today for bank accounts – with some at just 0.01%, putting all of your cash into one big pot can potentially earn you higher interest rates and a better return. This is especially true if together you can purchase a CD or some other investment when you wouldn’t be able to do this on your own.
3. This type of account structure can help children learn money management.
Most joint bank accounts are thought of as something for married couples, but children can also benefit from this structure. When a parent holds a joint account with their child, then they can begin to teach money management skills in a meaningful way.
4. It makes it easier for others to help manage finances.
If a parent passes away, then a joint bank account allows the other person to still have immediate access to money without enduring a potentially lengthy legal process. It also makes it easier for couples to cover common shared expenses, such as rent or groceries. Since each account holder in the US is insured for up to $250k by the NCUA or the FDIC, there is still some individuality allowed in the joint account structure.
What Are the Cons of Joint Bank Accounts?
1. You don’t really have any of your own money.
Even though you have access to cash in a joint banking account, it’s not really just “your” money. Your authorized partner also gets the same access to the money. When one person is earning a majority of the income, this can create feelings of resentment if the other person is the one spending more of the money – especially if there are bills that need to be paid and that isn’t happening. It also means one person can completely drain the account before the other can do anything about it.
2. You need permission to manage funds.
With a joint bank account, you may need permission from the other person involved to make investments, purchase big-ticket items like a vehicle, or manage your money in a way that you feel makes sense. For some, this also means that one party may become overly reliant on the other to be filling up the account with new cash.
3. All information about purchases is open and transparent.
There are no sneaky purchases that can really happen with a joint bank account. Now that can be a good thing if a partner suspects cheating or poor money management skills because those issues can be addressed immediately. It can be a bad thing if you’re trying to purchase a birthday present and the receipt for that purchase pops up immediately in your account register.
4. Creditors can approach all account holders.
If debts remain unpaid from a joint bank account, then all parties involved can be pursued by creditors. This means that someone may be responsible for running up a debt when they didn’t do any of the spending. If the other person involved does not want to pay up, it can put the other person in a particularly difficult financial situation.
The pros and cons of joint bank accounts show that it tends to be a good idea only when there is open communication and high levels of trust. There will likely be difficult decisions about spending money, saving it, and making wise investments, but two viewpoints are often better than one in the world of money management. This may create some initial discomfort, but with two people working together, many of the negatives can be avoided.