Many married couples and family members find opening and using joint savings or checking accounts convenient and useful. With only one account, there is only one set of fees to pay and many married couples find pooling the money together makes budgeting easier.
However, joint bank accounts are riskier than separate accounts. If the relationship between the account holders turns sour, there is chance that one holder may drain the account without the knowledge of the other. Therefore, those considering opening a joint savings or checking account should discuss its benefits and downsides before making a decision.
Here are a few things to consider before opening a joint bank account.
Have Joint Account with Someone You Trust
The most important thing is trust. Only have a joint account with someone you can trust completely. This usually isn’t a big problem where family finances are concerned and where putting the money into a shared account makes bill paying and debt repayments easier. Elderly parents can also trust their adult children with their finances if they have a shared account.
Choose the Appropriate Signatory Option
Banks usually give joint account holders the options of “both to sign” or “either to sign”. Those who can’t trust their partner completely can choose the “both to sign” option so that transactions can only be carried out with the consent of both parties. If trust is not an issue at all, the “either to sign” option is very useful as it allows either account holder to transact independently of the other. What suits one household may not suit another. So choose the appropriate signatory option carefully.
Ensure Account Holders Share Same Savings Goals
Set some rules even before the account is set up to make sure both account holders have the same savings goals or intend to use the money for the same purposes – paying for essentials such as utility bills, insurance premium, school fees, petrol and rent or extras such as holidays and entertainment. Both parties must agree to the rules to avoid misunderstanding and conflicts.
Communicate Spending Clearly and Honestly
Communicate with each other about your spending whenever money is drawn from the joint bank account. Keep all receipts and tax invoices as well as check the monthly bank statement carefully. This will help both account holders to keep track of who is spending what and if the spending is within the goals and purposes shared.
Avoid Being Bullied into Opening a Shared Account
If someone, even a very close family member, tries to bully or force you into opening a joint account with him, be extra careful. Sometimes, those with big bad debts will do whatever they can to siphon money from friends and family, including through opening a joint bank account. Financial counseling will be a better option for such individuals.
While having joint accounts can be useful, they are quite risky as well. That’s why it’s important to only have a joint account with someone you trust entirely, choose the appropriate signatory option, share the same savings goals with the other account holder, communicate with each other clearly about your spending and avoid being bullied into opening a shared bank account.