Discussing money and managing finances can be a sensitive matter even in the closest of relationships. You and your partner might be considering opening a joint bank account but refrain to go ahead to avoid any unfavorable situation. Perhaps you feel safer or less obliged to have separate accounts but still sometimes get troubled by the idea of managing your expenses together. To get rid of this confusion it is better to understand what joint bank account actually is and if it is worth having one. With better understanding and clarity of thought, you will be able to arrive at a better conclusion in terms of managing your finances as well as relationship.
What Joint Account stands for?
A joint account is no different from a standard banking account apart from the fact that two or more people share the accessibility. With a joint account, you can deposit your funds together for achieving common goals such as going on a vacation or buying a new home or any other expenses. It also enables a medium to share household expenses such as car payments, groceries, mortgage, and utilities, and so on. Eventually, it totally depends upon you as to how you and your partner want to use those finances.
All the bank-related activities such as making online payments, withdrawing cash, writing checks will be accessible to both the partners. Both of you can keep an eye on how the money is being spent by the other one. This can help you to plan a budget together and may prevent you from making unnecessary or secret purchases.
Having a joint account is not merely limited to married couples, a parent or a child can even have a joint bank account so that parents could monitor the day-to-day spending of teenage children and a grown-up child may help to manage the finances of aging parents. With that being said, if you are planning to have a joint bank account, then following are some of the benefits and setbacks to slightly clear the air:
Benefits of Having a Joint Bank Account
Transparency and trust
When you share an account, you encourage trust and communication. It takes transparency between two people to jointly manage money. It allows you to openly discuss your financial worries, goals, and wants. The joint account often signifies harmonious relationships and marital trust.
Organized finances
It is easier to plan a budget when everything is accumulated in one place. Too many bank accounts can create confusion and make it difficult to keep a proper track over day-to-day spending.
Ease in planning and paying expenses
With a joint account, both the partners can access money at any time, and hence, both of them can plan and manage expenses without depending on others especially during emergencies.
Disadvantages of having a Joint Bank Account
Limited autonomy
People usually with separate careers and financial assets may find it unnatural to give authority to someone else over their money no matter how strong their relationship is.
Compromised privacy and independence
If you have separate accounts, you will not have to compromise with your financial independence and you can choose to spend or save the money however you want to.
Distorted relationship
Every individual has a different approach when it comes to managing finances. There are people who spend more than the others that may not be acceptable to some people. Hence, it may lead to a conflict of interests and affect the relationship.
Finding a happy Middle Ground
Although, there are noteworthy benefits of joint as well as separate accounts, the best way to handle your money especially when you are a couple could be a concoction of both. It does not always have to be all or nothing. Instead, use a merged strategy. Couples can distribute paychecks into one joint account for paying household bills and keep the rest of the amount in private accounts for personal spending.
Another option could be to keep all your money with yourself and deposit the agreed-upon amount to a joint account every month. No matter what you choose to do, it should have a proper mechanism such as transfer on death provision or a power of attorney legal document, that enables access to each spouse into the separate accounts in case of some emergency or death of one of the spouses.
Conclusion
Managing money together is not as easy as it sounds in any relationship. At the end of the day, it takes trust, mutual understanding, honest communication, teamwork, accepting differences, and commonalities to make a decision that works best for both the partners. Being aware of your options can help you find the right account for your relationship. Still, you and your partner find it difficult to strike a conversation at home, consulting a financial planner can help you to make a meaningful decision.