I always find that the topic of personal finances when you are married raises a lot of debate. Especially when it comes to the discussion of opening a joint bank account.
I think the way married couples manage their finances is a very personal decision. But I will say that I believe in having joint accounts and assets, and I also believe in having separate accounts.
That's right, there are benefits to having both joint and separate bank accounts when you are married. I'll explain more about opening a joint checking account, how to open a joint savings account, and the pros and cons of joint and separate accounts.
Keep in mind that this article is purely an opinion piece. At the end of the day, it's important to do what works best for you, your partner, and your financial habits.
What is a joint bank account?
How do joint bank accounts work, and what is a joint bank account? Basically, you have bank accounts that both you and your partner can access. You can both put deposits into them, and you can both withdraw money, too.
Joint banking can also be set up with family members, a business partner,(your partner or spouse may also be your business partner!), etc. You may even consider opening a joint account for your children when they become teens, as a teen checking account, so you can teach them about money.
Joint accounts don't have many differences from regular ones, except that you both have full control of the funds in the account.
What are the benefits of having a joint account?
If you are married, the bulk of your assets should be joint. Things like your long-term savings, your house, and your investments are things you should manage together.
You are a team
In a relationship especially a marriage, you and your spouse are a team. As team players, you can grow your financial portfolio more significantly than you would if your portfolios were separate.
Plus, it could make your marriage happier, according to one study. If you haven't considered it before, it may be time to open accounts that you both use.
Legal benefits of a joint bank account
There is also a legal benefit to opening a joint bank account. In the event that one spouse passes away, the other spouse can have access to the funds and be the only owner. This is called rights of survivorship.
They won't have to go through the hassle of dealing with wills or going through the legal system. It can provide a huge relief to have those funds available when you need them during an already very difficult time.
Liquidity
Opening a joint account also gives you more liquidity. By having access to a pool of funds, you can withdraw the money in the case of an emergency without waiting for your partner to transfer the funds to you.
Better money conversations
Part of having joint accounts means you are discussing with your spouse often (or at least you are forced to). It can make it easier to save up for purchases, vacations, and more when you're both contributing to the funds.
This is one of the top benefits of having a joint account. You both can see what's happening with your joint finances, and you can make money decisions together. Ever heard the saying, "Two heads are better than one?"
It is a well-known fact that money is the number one cause of divorce in marriages. But if you are talking and planning together, then all your cards are laid out on the table. That way, you can minimize issues around your finances from a decision-making perspective.
The cons of having a joint account
There are many benefits for account holders who have a joint bank account. However, there can also be downsides if you just have joint accounts and don’t keep separate accounts as well.
Some people don't like to keep joint accounts, and it's not a small percentage. In fact, 28% of millennials have no joint accounts despite being in relationships.
Opening a joint bank account may make you feel less independent
Having to always talk to your spouse about money can cause one spouse to feel like they have lost their independence. If you always have to explain or justify your spending habits, it could put a strain on the relationship.
It could also cause one person to hide purchases or even open a secret bank account, which isn’t good for any relationship. Additionally, it can be hard to have shared finances if one partner is a spender.
Debt and credit
Another big issue is if one spouse has a lot of debt and a bad credit score. That could negatively impact the other spouse and have an impact if they later try to get a loan for a car or a house.
If one spouse has more debt than the other or a lot of credit card debt, be sure to discuss how the debts will be handled before opening a joint account.
Divorce
If the relationship or marriage ends, having joint bank accounts can also be a dilemma. This is because each spouse has the right to withdraw funds and close the account without their partner's consent. If the marriage ends badly, one spouse could easily leave the other without any money at all.
One way to help deal with the messiness of divorce before it ever happens is to sign a prenup when you get married.
Before you sign any prenup, understand very clearly what's stated in it by having a sit down with your lawyer to go over it. If you already signed a prenup, find it and make an appointment with your lawyer to go over it.
If you end up needing to separate your joint bank account, you will likely need to close the joint account and then open your own.
What are the benefits of having separate accounts?
I'm a fan of separate bank accounts for day-to-day transactions. Decide with your spouse how much money you each get allocated on a weekly or monthly basis from your joint accounts. Then, transfer this into your individual accounts.
Things like groceries and shopping money would go into these personal accounts. This way you are not constantly explaining every single transaction you make to each other.
Some couples also have separate savings accounts where they save for things they want to get outside of their joint finances. For example, your wish list handbag or shoes, your spouse's tech toys, etc.
You might also want to keep your accounts separate if you were married before or have a complicated family situation.
For example, if you have assets from another marriage or bought a house before you got married, you might want to keep things separate. Having a separate bank account helps you know what is yours and theirs.
What are the drawbacks of having separate accounts?
If you want to have a separate bank account because you want to hide your finances from your spouse, then think twice. This is a terrible idea. Don't use separate accounts to hide money. Financial transparency is important!
Remember, you are a team and you should always act in the best interests of your team so you can win together. Just because you have separate accounts for personal transactions doesn't mean you should go crazy spending large amounts of money without talking to your spouse.
For instance, my husband and I agree to have a conversation with each other if we spend more than $500.
Having separate bank accounts can actually put more of a strain on your relationship if you both are not upfront about your finances. Just because you keep separate accounts doesn't mean you should keep financial secrets from each other.
When is the best time for opening a joint bank account?
If you're thinking of opening a joint account, you might be wondering when the right time is. How do you know when the time is right to become a joint account holder? The first thing is that you should be married. The reason for this is that before you're married, even when engaged, your money is still your money.
Although if you have certain expenses to save up for before marriage, such as wedding costs or paying for a new house, it can make sense to start a joint savings account that you both contribute to while engaged. But after you get married, you and your spouse are a team, and your finances are part of that.
After marriage, there isn't a right or wrong time to begin joint banking. When you and your spouse are comfortable doing so is the best time. Some may find it easiest to do this at the beginning of their marriage, while others may take time. It's up to you and your spouse. Perhaps you might decide not to open joint accounts. That's perfectly fine too.
It's also important to have set guidelines for how you'll operate any joint accounts. Have an honest conversation with your partner before you set it up and decide how much of your money is for the joint account and how much is separate.
Types of joint accounts
Wondering how to open a new account? Here are some things to consider, from opening a joint checking account to how to open a joint savings account.
Opening a joint bank account: Checking account
How do joint checking accounts work? Opening a joint checking account is nearly the same as opening a regular checking account. You and your spouse will be asked for your personal information, including your social security number, date of birth, current address, and driver's license. You can complete this process online or in a bank.
Open a joint bank account: Savings account
Again, the process for how to open a joint savings account is nearly the same as opening a regular savings account. You can often do this online and in banks.
Simply apply and go through the normal process, and be sure to set up a joint savings account, not a regular one. Open a joint savings account and have the best of both worlds - separate checking but shared savings and goals.
Linked accounts
Another option for sharing expenses and finances is to set up linked accounts. This is not the same as a joint account. Linked accounts are accounts that are linked to each other.
You can easily transfer money between them. You might choose to link your individual accounts at the same bank instead of opening joint accounts. Or your accounts can even be at separate banks if you prefer.
How do you decide what's best for you and your spouse?
No matter if you decide that opening a joint bank account is best, or if you decide to keep things separate, communication is key. How you choose to go about combining finances after marriage is a personal decision. Whether you decide on opening a joint checking account or not.
Talk about your finances on a monthly basis and make sure you are both on the same page when it comes to long-term financial goals. For instance, your goals might include buying a house or saving for retirement.
Asking each other money questions is a great icebreaker. Also be sure to take the time to budget for things you share, like housing and grocery expenses.
If you’re unsure about what method would work for you, then try both! Merge your finances slowly to see if opening a joint bank account works for your marriage before you dive in.
There are all kinds of relationship advice out there but managing your finances in a marriage is a personal decision. Regardless of what anyone says, figure out what works well for you both and manage your money accordingly.
To discover more about money, listen to our podcast, Clever Girls Know, or see our book selection for more ideas about investing and making money.