Should Couples Have Joint or Separate Bank Accounts?

Should Couples Have Joint or Separate Bank Accounts?

Should Couples Have Joint or Separate Bank Accounts?
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Marriage means combining all aspects of your life, including finances. So, it’s only natural that you would want to have a joint bank account. But the decision to switch from separate accounts to a joint account should be made only after weighing the pros and cons.    


Maybe you’ve heard about the benefits from family members or colleagues. Some married couples with a joint bank account might tell you that it allows you to manage your family finances better. They might say that meeting your financial goals will be easier with a joint account. Shared expenses would make things better, they might suggest.


Others might be more skeptical and warn you that joint accounts hinder your financial freedom. Your spending habits, credit card expenses, and overall financial flexibility will now depend on your spouse. Whenever you withdraw money, your spouse will know. If this creates tension, a joint account may not be the right solution. 


How do you deal with these conflicting views? When it comes to financial matters, a dispassionate and objective analysis is needed. Before deciding for or against a joint account, you need the full picture.  


To help, we’ve compiled the pros and cons of a joint account. But first, let’s review the concept.


What is a joint bank account?

Joint accounts are accounts opened by two or more people. If you were to open a joint account, it would have both your and your spouse’s name. You would get all the benefits of a regular account—the only difference is that both you and your partner would be able to manage the account.  


You both have authority to make withdrawals and deposits. For instance, your spouse would be able to deposit a check that’s made out to you. Both you and your spouse would receive checkbooks, debit cards, and all other benefits associated with the account. 


Different financial institutions require different information to open a joint account. Usually, this includes proof of address, and financial and personal information.  


Benefits of a joint account

Simplifies daily financial tasks

While everyone understands that marriage is a big step emotionally, few realize how significant it is financially. As a single person, you likely developed a method regarding personal finances, based on your individual needs at that stage of life.


But marriage brings a whole new level of financial responsibilities. Now, you’re in a full partnership. At first, you may be overwhelmed by the sheer number of new obligations. There are individual expenses, utility costs, grocery bills, and much more. 


With a joint account, everything is simplified. There’s one account to which you deposit your income and use to manage expenses. All it takes is a single bank statement to see how you’re doing financially as a couple. You can divide tasks to ensure nothing is delayed or missed. For instance, you can oversee credit card bills while your partner handles utilities.


Accountability and transparency

Without a joint account, there may be suspicion about each other’s income and spending habits. Plus, not many people can—or are trained to—ask questions about finances. It might also be embarrassing to ask about credit card bills in the initial stages of marriage. 


You wouldn’t know whose debit card is being used where. Who’s spending more can always be a point of contention. You might see it as a personality trait or habit, but there’ll be lingering doubts. The failure to hold each other accountable can have devastating consequences for a marriage.


One primary reason to opt for a joint account is that it brings everything out in the open. You’ll know your total income and expenses. Who pays for what and who spends how much on what will be established with a joint account, making life easier for both of you.


Encourages financial responsibility

You’re much more likely to make impulse purchases and run credit card debts when you don’t have to answer to anyone. Joint accounts can go a long way in helping you and your spouse reach your financial goals. That’s because you’ll be responsible to each other for income, expenses, and savings. 


When you have to explain your actions to your spouse, you’re more likely to manage your credit card expenses and spend within your limits. Couples who reach their goals—including buying a house, having an emergency fund and building a retirement fund—are financially responsible couples.


Simplifies legal affairs

While this may not be a pressing concern for newlywed couples, it’s good to know that joint bank accounts have legal benefits. In the event of a spousal death or serious illness, accessing a spouse’s account will be difficult without a joint account. In fact, a joint account ensures that you’ll have unimpeded access to funds since it’s also in your name. 


Brings couples together

It shouldn’t be surprising that couples with joint accounts are happier than those with separate accounts. Studies from UCLA, Notre Dame, and University College of London show that couples who manage their accounts together are happier, and their marriages are less likely to fail.


We should note that this isn’t a case of correlation being confused with causation. In other words, they’re not saying that couples who are happier will have joint accounts; but rather, those who have joint accounts, and are accountable and responsible, will be happier. 


The reason could be that actively managing finances jointly encourages couples to be transparent and work together. When goals, resources, and responsibilities are shared, there may be less room for resentment or suspicion. 


Drawbacks of a joint account

This isn’t to suggest that joint accounts are problem free. Depending on your financial goals, personal beliefs, and relationship stage, you may need to objectively analyze circumstances before setting up a joint account, keeping aware of problems it could create. 


Low credit score can impact joint finances

With a separate account, your financial history and habits determine your credit score. If you pay your credit card bills on time and never defaulted on a loan, you’ll have a healthy score. It’s yours to maintain and manage. 


But your spouse may have a different history. If your spouse has student loans, debts, unpaid credit card bills, alimony, or child support payments, those will affect you, too. Your spouse’s low credit score will negatively impact your financial health. Your spouse’s creditors could also raise a claim to any money in a joint account, leaving you vulnerable.


You may not even be aware of your spouse’s credit history. You may not know how many times they have defaulted on payments. If you set up a joint account and transfer your income to that, it might be too late to protect your share of any money. 


Loss of financial independence

Money is one of the most powerful forces of empowerment. If you earn, spend, and save independently, you have a sense of financial freedom. Your financial decisions are based on your beliefs and ability. 


But with a joint account, someone else will have a say. You’ll have to explain your actions, which could feel like you’re losing financial freedom. 


Can amplify communication issues

Joint accounts work when there is transparency and communication. Without these, a joint account can amplify existing problems. If a spouse doesn’t typically communicate his or her feelings or problems, having to explain spending habits will be challenging. 


Failure to disclose expenses or credit faults may encourage one’s partner to do likewise. This creates a vicious cycle of suspicion and mistrust, leading to financial mismanagement. 


Is a joint account right for you?

It depends on your need for financial independence, and how well you and your partner can collaborate. If you’re considering a joint account, you and your spouse will need to have an honest discussion about each other’s financial history, debts, defaults, spending patterns, and financial goals.


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