You’ve tied the knot and are happily married. Congratulations! Now that you’ve decided to share your lives with one another, the next step is to combine your finances and open joint accounts, right? Perhaps... but then again, perhaps not. Joint accounts work for some married couples, but they’re not the right choice for everyone.
Here are five things to consider before opening joint bank accounts with your new spouse.
1. Joint accounts can make managing money easier
Why should you consider opening joint accounts at all? Marcus Kusi, the blogger behind Our Peaceful Family, says it was the right choice for him and his wife, Ashley, because it “helped us get on the same page about money and how and where it was spent and managed.” They stay on track with monthly budgeting meetings and weekly check-ins.
Other couples we interviewed agreed that using a joint account to pay for shared expenses, such as utility bills and groceries, can make tracking your family’s spending easier.
If you have two sets of eyes reviewing your finances, it could also be easier to detect fraud and find opportunities to save money. After combining finances, you may also find it’s easier to meet account minimums, avoid fees or get a higher interest rate on the money in your joint checking or savings account.
2. You both fully own and are responsible for the account
One thing to consider before opening a joint bank account is that funds in the account generally belong to both parties. While the laws vary by state, in most cases, either person can spend the money whenever and however he or she wants if it’s in a joint account, and all the money might be at risk if either person falls behind on bills or is sued.
3. Discussing account management and ground rules is important
Before opening a joint account, it may make sense to have a discussion with your new spouse about who will manage the account and how the money will be spent. If you decide the joint account is for emergencies or vacations, it’s likely clear when you should use it. But if it’s intended to pay for household bills or general expenses, miscommunication could lead to overdrafts or arguments.
Having one person manage all the bills, or splitting them and paying the same ones month after month, could prevent mistakes. To avoid arguments when spending money, some couples choose a threshold, such as $100, and any purchase above that requires approval from both partners. Others don’t set a particular dollar amount, but check in before making major purchases from a joint account.
4. You can have joint and separate accounts
Laurie Itkin, a financial adviser and Certified Divorce Financial Analyst® (CDFA), says she and her husband have a joint account for shared household expenses and vacations. They contribute equal amounts to the joint account each month, and the rest of their income goes into separate accounts for personal expenses, such as clothes or hobbies. This allows them to both share responsibility for the family’s financial health and preserve their individual financial identities.
Han Chang, a co-founder of InvestmentZen, and his wife use a similar system. They pay their bills with a joint rewards credit card and then pay off the card from a joint checking account. Chang says there are several benefits to the arrangement. “She’s new to the U.S., so this helps her build credit, and the points racked up go toward free hotel stays when we travel.”
In addition to their joint checking account, the Changs also keep separate accounts for personal expenses. “We talked about it quite a bit before we got married,” Chang says. “Having the conversation earlier on in the relationship definitely helped.”
5. Joint accounts aren’t for every couple
Wanda Anglin, president of SEO Buzz Internet Marketing, and her husband also had a conversation before marrying. However, they were in different places financially and decided against a joint account. They did take out a mortgage together, but 26 years later, they still split bills and maintain separate accounts.
Joint bank or credit accounts can make managing money easier for some couples, but they’re not for everyone. Some couples prefer using joint accounts for shared expenses or savings goals, but also maintain separate accounts for personal expenses. Others keep all of their financial accounts separate. If you do choose to open a joint account, remember that the money, debt and responsibilities fully belong to both parties.