By Charlene Oldham
Many couples claim to live by the axiom of, “What’s mine is yours and what’s yours is mine.”
Opening a joint bank account represents one way to put that into practice. With a joint account, both partners have access to the funds and can make deposits and withdrawals. Both are also liable for bounced checks, overdraft fees or any other charges and expenses associated with the account.
Sometimes having a joint account makes sense for couples, since covering shared expenses is easier. And, for couples on the same banking and budgetary page, a joint checking account can help build trust, accountability and bank balances toward mutual monetary goals. But there are cases when opening a joint account can be a bad idea.
YOU AREN’T MARRIED
“I hate to sound old fashioned, but there are legal ramifications beyond the warm fuzziness of sharing your names on checks.
If you’re not married, and this is the way you’re showing a commitment to each other, reconsider the show of affection,” said April Masini, an author and relationship expert at AskApril.com. “Jewelry is a nice gesture that isn’t going to require two signatures to close the account. So are shared goldfish. Or a fern.”
While Masini’s tone is playful, her advice is anything but. Married couples can rely on the legal system to untangle their finances in the event of a divorce, but unmarried partners usually don’t have the same protections.
Relying on candid conversations, and even a contract, if you elect to open a joint account without being married is the best you can do.
The decision to open a joint checking account should come only after numerous discussions of your money management techniques and the concerns and details that might come with a combined account. Then, according to Money Under 30, couples should create a simple contract that outlines which accounts and investments belong to a particular partner and which are to be divided equally.
Finally, even the most committed couple should leave some accounts separate if they aren’t married or in another type of legally recognized relationship.
YOU’RE STILL IN A ‘PARTNERSHIP’ WITH YOUR PARENTS
A 2013 Pew Research Center report found that, among adults between 40 and 59 with at least one grown child, 73 percent said they’d helped support an adult son or daughter in the prior year, with half of those parents saying they were their child’s primary means of support.
Personal finance educator Taffy Wagner said financial dependence on parental payouts is one sign you and your partner might not be ready to open and manage a joint checking account. For example, if you’re married, have taken a loan from your parents since tying the knot and made no moves to pay it back, sharing money with someone else is likely a bad idea. Taking handouts can also lead parents to become de facto money managers within the marriage.
“Your parents are handling you finances even though you are married. They are calling the shots,” Wagner said when describing the scenario. “This is interfering with your marriage, but you don’t stop them from managing your money.”
So couples need to cut the parental purse strings before deciding on a joint account, for the good of their financial future as well as their romantic relationship.
YOU ARE SPENDING AND SAVINGS OPPOSITES
“If one of you is a big spender and the other is a big saver, you’re going to create big drama by co-owning a checking account,” Masini said. “Financial discrepancies can be deal breakers, and they should be taken seriously. Opening a joint checking account can create deal-breaking problems in your relationship.”
Wagner said some other issues can also break the bank. If you or your partner are carrying significant debt without a clear payoff plan or have undesirable spending habits, including not paying bills on time, spending money that should be devoted to necessities on meals out or mall binges, or frequently borrowing money from friends and family, those issues should be exposed and addressed before you open a joint account.
Charlene Oldham writes for GOBankingRates.com, a leading portal for personal finance news and features, offering visitors the latest information on everything from interest rates to strategies on saving money, managing a budget and getting out of debt.