Joint account with partner - Yay or Nay!
“A relationship is like a bank. When you have deposited money, you can make a withdrawal. If you don’t have money, your check will bounce”. –Pastor Albert Ocran
The majority of people dream of finding love, and for those who think they have found it sharing everything from secrets, clothes, time, and food comes naturally; some even open joint accounts as part of the next stage of their relationship. But could having a joint bank account be a step too far? Well, you will soon find out as we unearth the advantages and disadvantages of having a joint account. According to a study conducted in recent years, 42% of individuals have a joint account. This figure rises to 58% when people who have had a joint account in the past are included. The research also indicates that the top 5 reasons couples chose to open an account together was because they had taken the next step or planned to take the next step in their relationship, such as moving in together, getting married and planning to buy a property jointly. Additional reasons included one partner proposing the idea of opening a joint account and the other partner agreeing, whereas others wanted to contribute equally financially.
Furthermore, the research uncovered that 59% of couples felt that having joint accounts made managing their funds together simpler. 49% of which found that tracking their spending was also more manageable; a third, 33%, stated that their decision making together had improved.
Joint accounts how do they work:
Joint accounts work by both people depositing money into the account. The funds can be paid through debit cards or contactless payments, and bills can be paid with regular direct debits and standing orders. Joint account holders will also have the option to separate bank accounts for personal spending and a combined one for household expenses, mortgage and utility bills. Bear in mind that both individuals opening an account will go through a credit check before opening a bank account. Therefore, honesty is the best policy to give you a better chance of not having your application rejected.
Advantages of having a joint account:
- Opening an account can make it easier to split household bills equally and can be a fair way of dividing finances and savings
- Some couples also find it easier to manage finances with joint accounts
- It helps couples be more organised with their finances
- Joint accounts are also helpful for saving up for joint ventures such as buying a property together, going on holiday as with two people placing money into the account, joint saving goals could be achieved more rapidly by duo savers
- Joint account holders are not negatively impacted regarding financial compensation as they are still eligible to the financial services compensation protection scheme of £85,000 for savers because the threshold is per individual saver and not per account
Disadvantages of having a joint account:
- The disadvantages of having a joint account can include giving your partner access to your money as you never know what they might do or what their true intentions may be; for instance, one partner goes on a shopping spree which was not part of the agreement or sometimes couples have disagreements over how money should be spent
- Relationships are breaking down more than ever, even long-term relationships, so if things do not work out between you and your current partner, you could end up being worse off than if you had kept your money separate from your partners, though you could ask your bank to freeze the account until you have decided to what to do. And the pandemic has skyrocketed the break-up process according to the BBC.
- Arguments could arise regarding who is depositing more money and spending habits, so perhaps it is best to think thoroughly about whether joint accounts are a worthwhile investment in the long term. According to Investopedia money is one the main reasons why couples argue
- Joint accounts can also reflect negatively on your credit report if your other half has a bad credit score, which would also affect your credit score.
- Another downside to joint accounts with partners is that overdrafts and other credit agreements with your significant other mean that you are both held responsible for repaying debt. In addition, if they decide not to pay the repayments are unable to pay, you would be responsible for paying the total amount payable.
Tips on managing joint accounts:
- Before opening an account, discuss joint intentions of opening an account
Create a plan with your partner of why you would like to save, what is important for you both to save for, such as joint household bills and mutual goals
- Once an account is opened, make sure both partners have access to the account
Ensure that both of you have access to the account so that you are equally aware of the balance and withdrawals being made in the account
- Check-in with your partner regularly to see that both of you are still on the same page regarding finances
Hold meetings to make sure that you and your partner are still happy with having a joint account and still want the money to go towards the same objectives discussed before the account was opened
Opening a joint account with a partner is a decision that should not be taken lightly as things may be rosy now, but you never know what the future may hold for you and your partner. However, if there is honesty and clear communication about your financial circumstances or changes, such as being demoted at work or changing your mind about what you would like to save for, a joint account can be successful. Having regular meetings are also crucial to communicating about the financial situation. Sometimes relationships have an expiry date; if the connection breaks down, communication about finances will still be essential as you will need to discuss how to split funds in the joint account. The best thing to do is to pay equal amounts into the account while you are together and divide the money equally if the relationship comes to an end because if one partner invests more than the other partner they could refuse to divide equally. Also, bear in mind that financial confrontations can cause a dent in your connection with your partner; many relationships have ended for far less. However, saving together can also solidify relationships and make them stronger; having joint accounts can bring you closer to achieving many of the goals you both have as a couple.