Joint and Separate Bank Accounts For Young Couples

Finances are an important subject for young couples. Buying a new home, paying off bills, and creating an education fund for children are just some of the significant financial goals a young couple can have. But you may be wondering, what is the best way to achieve these goals? There are many strategies at your disposal. Setting up a joint or separate bank account is one way young couples accomplish their financial dreams. However, deciding which one to use is another difficult task.

This article lists the pros and cons of using a joint or separate bank account. The following information will help you decide which account best suits your situation.

Joint bank accounts

A joint bank account is just like a regular account except it is shared between two or more people. While they are mostly used by couples, business partners, friends, and parents with children also use joint accounts. Anyone listed as a user can make deposits, withdrawals, payments with the account. Chequing and savings accounts are the most common accounts held jointly. Credit cards, lines of credit, and mortgages can also be held by multiple people.

Benefits of a joint bank account

Joint bank accounts make it easier for couples to make payments. Both individuals can make equal contributions to things like the monthly credit card statement, rent or utilities bill. Paying off a mortgage is easier when two people make the same contributions. Joint accounts also help couples split the financial tasks. One person can focus on the everyday expenses (e.g., groceries), while the other handles the monthly bills. This eliminates the confusion over who’s paying for what.

A joint savings account is useful when couples have a shared goal like buying a new house, setting up a college fund, or going on an expensive vacation. Having two people contribute to the saving account makes it simpler to achieve those goals. It is more convenient to have a shared account to deposit savings. Additionally, you and your partner can easily track the progress of the account (how much closer you are to your goal).

Joint bank accounts teach people better money skills. Since both partners are responsible for the financial health of the account, they learn new ways to spend and save money wisely. Joint accounts can also lead to better financial accountability. Every purchase or payment a person makes with the shared account effects their partner as well. Therefore, both people must make smart financial decisions.

Drawback of a joint bank account

Joint bank accounts require good communication and coordination. Both partners must be on the same page when it comes to the transactions and withdrawals made with the account. If communication is poor, the relationship between you and your partner can worsen. Arguments over spending habits and contribution levels, and who pays for what can get pretty heated. You do not have control over the transactions and withdrawals your partner makes with the joint account. This can be risky, especially if your partner has difficulty in controlling their spending habits. If you or your partner have outstanding debts, opening a joint bank account together my not be the smartest move. Having your hard earned dollars used to pay off your partner’s debt can leave you feeling bitter and angry.

If the relationship turns sour, closing a joint bank account can get messy. A resentful ex can drain the account of funds without your consent. This would leave you with no recourse since the account was shared. Distributing the deposited money can lead to heated fights. For example, one person may feel their ex doesn’t deserve the amount of money they will receive, and vice versa. Plus, the entire process can take longer than expected, leading to many frustrating and stressful moments.

Opening a joint bank account is a major adjustment for many people. If you have never used a joint bank account before, you may feel like you’ve lost control over your finances. You and your partner must agree on how the money in the account is used. If you want to make a purchase with the account, you’ll probably have to clear it with your partner first. Feeling like you have lost autonomy over your money is normal and usually goes away after you make the adjustment. But for some people, the feeling never goes away.

Benefits of a separate bank account

As the name suggests, separate bank accounts are used and controlled by a single person. They are for your personal finances.

If you want more control over your money, a separate bank account is the way to go. You are free to make transactions and withdrawals without consulting with your partner beforehand. You won’t have that feeling of somebody looking over your shoulder every time you make a purchase. And according to TIAA, having separate bank accounts can actually make a relationship stronger. There might be less arguments over spending habits and income. You’ll be able to make personal expenses without facing the judgement from your partner. And if you and your partner decided to split, sorting out finances will be less messy. You do not have to go through the process of closing a shared account.

In general, using separate accounts at the start of a serious relationship is preferred by many couples. It is a good way to ease in to sharing expenses and managing finances together. You and your partner also get a chance to see whether your spending habits are compatible. You won’t be surprised or shocked out how frugal or carefree your partner is with money, there will be a feeling out period.

Drawbacks of a separate bank account

It can be harder to pay monthly bills with separate bank accounts. You and your partner will have to split the bills equally and pay them with your individual accounts. For some couples this is no problem. But some couples like the convenience joint bank accounts provide. It will can also take more work to coordinate who pays each monthly bill. Saving up for a shared goal can also be trickier with separate bank accounts. It can take longer using separate savings accounts, while combining you and your partner’s income speeds up the process. For example, my parents set up a joint account to pay of the mortgage on their home. It took them 10 years to pay off the loan. If they had done it separately, it would have probably taken longer.

Which is better?

Deciding between a joint and separate bank account depends on you and your partner’s preferences. It will also depend on the financial goals the both of you have. Take some time to discuss things like paying off debt, saving for retirement, paying monthly bills, and making everyday purchases. Once you talk things through, you and your partner will have a better sense on which account is right for you.

But choosing between the two accounts doesn’t have to be a black and white decision. Many couples prefer a hybrid approach. They use the joint account for shared expenses while keeping most of their money in their respective accounts. In fact, financial expert Suze Orman says operating a single joint account is not a good strategy. According to Orman, a single joint account can lead to “power imbalances and a loss of independence in the relationship”. That’s why Orman recommends the blended approach. Divide up the monthly bills based on income.

This strategy has drawback of its own. You will be managing several bank accounts at once, which can get complicated.

Frequently asked questions about joint and separate bank accounts

How do I open a joint bank account?

To open a joint account, you and your partner must provide a government issued ID, like a driver’s licence or passport. Personal information like date of birth, Social Security number, and your current address must be provided as well. Gather up your financial documents in case they are needed. Whether you’re opening a joint account online or at a phyisical branch, you and your partner should both be present.

How do I close a joint bank account?

There are several things you and your partner must do before closing a joint account. First, both of you should agree to close the account. If there is a disagreement, the process will stall and take much longer to complete. The next step is to stop all withdrawals and transactions from the account. Once that’s done, bring the account balance to zero. Contact your bank to transfer funds from the joint account to you and your partner’s separate accounts. Now that the balance is zero, you can meet with your bank advisor to close the account. Each instituion has their own procedure for closing joint bank accounts. But in general, bring at least two forms of ID plus any important financial documents. Some banks will require that you and your partner both be present to close a joint account. If one person is unavailable, a written document with their signature is needed.

What are the best joint bank accounts?

The major Canadian banks all offer joint chequing and saving accounts. All you have to do is add a joint account holder when you sign up for a new bank account. Each institution has their own interest rates, fees, minimum balances, transaction limits, and other special features. Shop around to find the best deal. EQ Bank has a good joint savings account. Users earn 2.50% interest and pay zero fees. There is no minimum balance, and you can deposit up to a maximum of $500,000.



Are joint bank accounts frozen when someone dies or is ill?

The question of what happens to joint account when one of the holder’s dies is an important one to answer. Hopefully this doesn’t happen to you or your partner anytime soon, but it’s something to keep in mind. Joint accounts are usually created as “Joint With Rights of Survivorship”. In the event of one account holder passing away, the surviving account holder receives the assets. Rights of survivorship is typically automatic, but you should double check with your bank to see if your joint account is set up this way. Otherwise, the assets of the account will be distributed according to the deceased will. The account would also go through the probate process and be subject to probate tax.

Who would benefit from a joint bank account?

Joint bank accounts can benefit various people. As I mentioned earlier, married and unmarried couples like to use joint bank accounts to pay for shared expenses and save up for a shared goal. Parents of teenagers and young adults like to set up joint accounts to manage their child’s finances when necessary. For example, parents of a university student can deposit cash to a joint account for expenses like tuition and textbooks. Parents can also use joint accounts to teach good financial habits to their children. Joint accounts are sometimes used by adult children to help manage their elderly parents’ finances (e.g., bill payments, medical expenses). Lastly, joint accounts are useful for business owners/partners to deal with shared financial duties, like paying food suppliers and vendors.

Sources used:

Young & Thrifty: Should Couples Have Joint or Separate Bank Accounts?

Forbes Advisor: Joint Bank Account: What is it and How Does it Work

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Updated date

November 24th, 2022

About the author

Nicholas Mah

Nick Mah is a writer who enjoys writing about music, movies, sports, and cooking related topics. He also enjoys reading and writing about history. In his spare time, he enjoys watching movies, reading a good book, going for long bike rides, listening to music, or playing his guitar.
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