Are people still getting joint bank accounts together, and are there any benefits to setting one up? According to an AIG Life survey in 2019, 1 in 6 couples keep their finances completely separate from their partner (17% of 3,000 people in the UK). A few months ago, we ran our own poll on our Linkedin channel asking users if they have a joint bank account with their partner and 69% reported that they do. To help you decide if it’s worth doing at all, we took a deep dive look into the pros and cons.
Pros of a joint bank account
Let’s start with the pros. There are practical benefits of paying bills such as rent, mortgage, utility bills through a joint account and this also helps you generally manage your household finances together if you’re co-habiting. Everything you pay for equally can come out of the same account. This can also allow you to keep personal funds separate if so desired, with each person just contributing the money to cover the bill costs to the shared account.
You can also use a joint bank account to save for a shared interest, such as a holiday or buying a house. Having these savings separate from the day-to-day accounts is a great way to organise your finances and also have a place you can both view your progress towards your savings goal.
Something a little less positive but equally important is that in the event of death or incapacity, the other party can immediately access all of the funds in the joint account. This wouldn’t be the case if it was an account in a solo name, even if the couple were married.
Cons of a joint bank account
Now onto the cons, and perhaps the most obvious one is that both parties with a joint bank account can access all funds. This is a particular risk if a relationship goes sour. Either party could utilise the funds for another purpose or even empty the account against the other’s wishes. If there is an overdraft facility, one party could access this without the other’s consent.
Additionally, failure by either party to contribute their share to a joint current account could mean that bill payments are missed and this can affect both parties’ credit rating. This can impact your ability to obtain credit in future, like taking out a loan or a mortgage for example.
In the event of divorce, a joint bank account is usually seen as joint property even if all deposits were from one party. They might also be subject to inheritance tax if the parties were not married or in a civil partnership. You can read more on this topic here.
Tips for running a joint account
Here are some useful tips for running a joint bank account.
1. Set your goals and a budget
From the beginning it’s good to be clear with each other on what the joint account is used for – whether it’s for shared bills and expenses like rent or food shopping, or for saving towards purchasing a home or going on a holiday together. Between you, work out how much money you will need to deposit into the account regularly
2. Set up regular payments
Once you’ve agreed on the goal and the total amount needed, you should agree on how much each of you pays in and when. To avoid any missed payments, it’s good practice to set up a direct debit or standing order from your personal account into the joint account.
3. Have good communication
Having clear, open and honest communication is not only good advice for any relationship, but also for your shared finances. All parties should be aware of any purchases made from the joint account to avoid arguments or one of them finding less money than they expected in the account.
4. Review regularly
Keep a regular eye on your joint account balance and make sure you have enough funds to pay for upcoming bills. This is important if you want to avoid the potentially high charges of an overdraft or a declined direct debit. Over time you’ll need to reassess the contributions you make into the account to take into consideration inflation and cost of living increases.
To sum up
It seems there are definite pros and cons for setting up a joint bank account with a partner, but mostly it seems to come down to trust and communication. If you have an open and honest relationship with your partner around your finances and you’re both on the same page when it comes to spending/savings goals, a joint bank account could be the ideal place for the money you share as a couple.