How To Make A Joint Account Work
Talking about money and managing finances can lead to stress in even the best relationship. Perhaps you and your partner are considering opening a joint bank account but worry it may get too complicated. Or you may be leaning toward separate accounts but worry that will make managing your joint expenses difficult. Understanding what a joint bank account is and how it works can help you make a smarter decision for your finances and relationship.
Joint account is a type of bank account that allows more than one person to own and manage it. There is no restriction regarding who can be an owner, which can include spouses, friends and business partners, among others. Everyone named on the account has equal access to funds, regardless of who deposited the money.
Joint bank accounts aren’t for everyone, and the rules for how your money is handled in the event of death or divorce vary depending on the type of joint account you open and your state’s laws.
When a spender marries a saver, financial fireworks can ensue, and not the good kind. Should the duo combine accounts to minimise stress and create a new life together or keep separate accounts to maximise options and retain financial autonomy? Or, maybe try a mix of the two?
We spoke with financial counsellors, marriage therapists and individuals about each approach and received these tips:
Separate accounts: Neal Flesner, a 35-year-old management consultant in Los Angeles, maintains a separate account from his wife. “I have my set of bills, and she has her set of bills,” he says. “It works.”
When the two tried a joint account, they found it challenging to track who had written the last cheque or how much money was left for separate ATM withdrawals.
With split accounts, they can access their own discretionary income and it has not created a complicated algebra of secretive purchases or stingy spending. Flesner says he still checks in about expensive buys, such as a new bike, and often picks up restaurant tabs, as his income is greater. When a recent electricity bill spiked due to heavy air-conditioning use, Flesner and his wife talked over how to deal with the problem and lower the monthly bill.
Couples who cooperate in this way earn financial and emotional rewards, says Tina Tessina, psychotherapist and author of ‘Money, sex and kids: Stop fighting about the three things that can ruin your marriage.’
“When a couple can talk openly about how they are handling their money, even if they keep certain accounts separate but have knowledge about them and access to them, it indicates that they are open about most things in their marriage, which predicts success,” she says.
Separate accounts earn additional relationship benefits when the couple sets up a joint account for paying mutual bills, says Tony Aguilar, founder of Austin, Texas-based Amiti Advising. The joint account can be funded 50-50 or weighted according to income. But he recommends a joint credit card for entertainment and “fun” spending, so the miles and points can add up towards free airline tickets or a getaway.
Tessina says a hybrid setup of separate and joint accounts can minimise disagreements. “As long as no one is overdrawing an account or a credit card, and bill paying and savings are covered by the joint account, they don’t need to be concerned about who spends more on clothes or who (spends more) on meals out,” she says.
Joint accounts: Some people have a Jack-and-Jill bathroom and a bank account to match. Money from individual pay cheque is deposited into the account, and both partners can access the account, pay bills and save money.
Rebecca Desfosse, a New Jersey-based frugal-living blogger at DoggoneThrifty.com, shares a joint bank account with her husband, Ray. Joint accounts require mutual cooperation and provide mutual benefits, Desfosse says.
“You always have to be accountable to the other person,” which is beneficial, she emphasises. “It forces us to discuss every major purchase to determine if it is something we truly need and whether it is the best financial decision for our family.”
Desfosse and her husband stick to a predetermined budget. If one of them wants to buy something not included in that month’s budget, the couple discusses the purchase.
But joint accounts can create problems, if a spendthrift watches a partner splurge or if an earn-and-spend personality feels constantly criticised by a saver. They also can disagree on the items they want to buy. For example, she may like collecting vintage figurines while he wants to spend hundreds on a high-end barbecue. These differences can lead to resentment.
Any debates and spending styles are better dealt with directly, says Sharon O’Neill, author of ‘A short guide to a happy marriage.’ O’Neill strongly backs joint accounts.
“It is less complicated and forces you to discuss how you want to spend money,” she says. “You don’t have to agree on everything.” But with a joint account, there is no way to sweep financial disagreements under the rug.
To support some financial independence, O’Neill says each partner is allowed freedom to spend up to a certain amount. Over that amount, it becomes a point of discussion, pre-purchase.
Accounting for openness
No matter which account approach is used, experts agree that openness and discussion are the keys to success. Tessina suggests weekly meetings for planning social events, conversing about financial goals and balancing the chequebook.
With the right attitude, this meeting can be a date. Combine it with a late-Sunday morning pancake breakfast or pair it with wine and cheese after the kids go to bed, Tessina says.
“As you talk about positive solutions and setting out long-term goals, many financial and other problems will be solved as they arise and before they become difficult,” she says.
Taking account differences to a professional also may be necessary. Like an iceberg in a relationship, the tip juts out in the form of “money troubles,” but beneath it a giant behemoth of power, security and family issues lurks. A professional financial planner or counsellor can help couples sort out the logistics of expenses, income, and checking and savings accounts.
With support, a couple can start down the right path together, establishing strategies of communication and motivation. “Much of finance is not necessarily about numbers but about habit,” Aguilar says. “If you establish the right habits early in life, everything else is going to work out for you.”