Guide on Sharing FinancesBank Accounts

gettyimages-1218172561-170667agetty imagesWhat Type of Bank Accounts Are Right for You? Managing money as a couple starts with establishing your financial goals. One of the first steps of putting those goals into practice is determining what kind of bank account (or bank accounts) you might need. Joint vs. Individual Bank AccountsIt used to be most common for couples to combine their finances into a joint account, where all the income was deposited and from which all the bills were paid. This typically happened once the couple was married, and it was a symbol of the blending of the two lives. These days, couples are less likely to ditch their individual bank accounts in favor of a joint account. Couples frequently choose to have both personal and joint accounts or simply continue the individual accounts they came into the relationship with. Individual AccountsAn individual account can only be held by an individual. That individual has the sole authority to access the funds in the account. While an individual account holder may add an authorized signer to the account to allow that person to make transactions, the account holder can place limits on the signer or remove the signer from the account entirely without needing authorization from the signer. Maintaining an individual account while married or in a partnership can help one retain financial autonomy. gettyimages-1208382206-170667aGETTY IMAGES
Joint AccountsJoint bank accounts are held by two or more people. They could be held by a couple, a parent and child, or a group with a common interest (like family members who own property together). When a couple opens a joint bank account, they have equal ownership, and each person has the right to add and remove funds from the account without seeking the permission of the other account holder. This can help when paying for shared expenses, as you don't have to transfer money back and forth to each other. There must be trust between people owning a joint account.gettyimages-2157586650-170667aGETTY IMAGES
Pros and Cons of Joint AccountsPros:

The couple can use money in the joint account to pay for shared expenses like a mortgage, utility payments or eating out. A joint savings account can be used to save for joint goals like a vacation or a new car.

Partners can share financial responsibilities like budgeting and bill paying.

If only one partner is working, both partners can still manage the money without the unemployed partner feeling indebted to the other.

Joint accounts typically have the right of survivorship, which means that if one account holder dies, the other account holders have full access to the money in the account without a will or going through probate.

While the Federal Deposit Insurance Corporation (FDIC) insures an individual account up to $250,000, a joint account is insured up to $250,000 per person. So, a joint account for a couple would be FDIC insured up to $500,000.

Cons:

All owners of a joint bank account have full access to the funds and can withdraw them at any time.

Each account holder is responsible for fees, such as overdraft charges.

All transactions are visible to all account holders, which may cause strife if partners do not have similar spending habits. A person can feel like their spending decisions are being scrutinized by their partner.

Creditors may seize funds in a joint account even if an individual debt is owed.

gettyimages-1413150733-170667aGETTY IMAGESSteps to Open a Joint AccountOpening a joint account is very similar to opening an individual account. Each person will need to provide their Social Security number, birth date, mailing address and government-issued photo identification. You may also have to provide a utility bill or some other proof of address. Some bank accounts require a minimum deposit to open, in which case you'd need to provide that amount when the account is created. When it's time to close the joint account, both parties must authorize permission to close the account. Tips for Managing Joint Accounts EffectivelyHaving common financial goals is the key to managing a joint account with your partner. While joint accounts can foster trust between partners, they could also cause stress if, for example, one partner is a spender and the other is a saver. The frugal spouse can do nothing once the money is spent out of the joint account. Tips:

Talk through goals and expectations, and reassess when there is a change in income or expenses.
Establishing which partner is responsible for which tasks, such as paying the rent and utilities, is essential.
The couple should meet regularly to discuss finances and review transactions. An open line of communication is vital to make these discussions less nerve-racking.

gettyimages-1407500282-170667aGETTY IMAGESA Blended Strategy—Individual Accounts Plus a Joint AccountChoosing to have a joint account doesn't automatically mean closing your individual accounts. Some couples decide to keep their individual accounts and open a third joint account, where a portion of their money is transferred to pay shared expenses. This can be done in several ways. Some couples choose to transfer equal dollar amounts into the shared account, and some choose to transfer an amount based on a percentage of their income. It is also common for partners to keep a set amount of "fun money" in their individual accounts and transfer the remainder of their income to the joint account. By maintaining individual accounts, each person preserves some financial autonomy. There's less of a feeling of someone looking over your shoulder and judging your golf club or handbag purchases.Couples Guide to Merging Finances-coverIntroduction to Sharing FinancesBankingBank AccountsMembershipApartment Leases or Home MortgagesManaging Student LoansInsuranceBuilding a Strong Financial PartnershipD&RLife InsuranceUser-guide