Should You Put All of Your Income into Your Joint Account?
There are many ways to manage your money as a couple, and it’s up to you and your partner to decide what you should and shouldn’t do.
In this article, we help you answer this important question: should you put all of your income into your joint account?
What is a Joint Bank Account?
A joint bank account functions in the same manner as an individual account, with the only difference being that it’s owned by two (or more) people.
How Do Joint Bank Accounts Work?
The features of a joint bank account are the same as a separate account, but with a joint account, both owners have the power to manage the funds.
Even if one individual is named as the primary account holder, both individuals own everything together.
Comparing the pros and cons of a joint account and separate accounts is no easy task.
When you keep your money separate, both individuals know what they owe. However, there’s still the question of which one of you will pay household bills, such as rent and utilities.
With a joint account, you opt to equally share funds. This allows you to save and spend together.
Some couples use a joint bank account as a means of combining funds, with each individual receiving an “allowance” each month.
There’s No ‘One Size Fits All’ Approach
In a perfect world, you and your partner would have a clear understanding of which money management strategy is best. And with that, arguments over money would be kept to a minimum.
But in the real world, there’s no simple answer to which approach to take. Furthermore, there’s no one size fits all solution.
Make decisions based on your personal wants and needs, the status of your relationship, and your short and long-term financial goals.
Be Wary of Joint Finances if One of You Has a Poor Credit History
Just because someone has a poor credit history and/or bad credit score doesn’t mean they’ll continue down this path in the future. However, you should proceed with caution, as it means they’ve made money management mistakes in the past.
As a joint account holder, your partner has access to money in the same manner as you do. If you have concerns about their ability to act responsibly, it may be best to opt for separate bank accounts for the time being.
Trust and Fairness
Before you open a joint bank account, there are two words to strongly consider: trust and fairness.
You must be able to trust that the other person is going to act responsibly. If you don’t have this, you’re setting yourself up for arguments over money — and that’s not something that anyone wants to deal with.
Just the same, the two of you must act in a fair manner. This means having a plan, following the plan, and sharing concerns and feedback as necessary.
Set Boundaries and Be Clear on Independence
Before opening a joint bank account, set boundaries for the two of you to follow.
Will the account be used for savings only? Will you use it to pay household expenses? Is it okay for either of you to access the money without asking for permission?
If you don’t set boundaries, you’ll soon find that there’s too much gray area. And with that, mistakes can and probably will happen.
Make Sure you are Equal Partners
With separate finances, you’re in full control of your bank account. But if you’re a joint account holder, it’s a must that you consider yourself an equal partner. This goes along with setting boundaries.
Talk to Your Spouse or Partner About Money
In addition to discussing your options upfront, make a vow to keep an open line of communications between the two of you.
If you’re sharing a bank account, you must feel confident in your ability to discuss finances — both the good and the bad — without causing an argument.
How to Handle Disagreements Between Account Holders
You hope to avoid disagreements, but these are likely to move to the forefront at some point.
You may disagree on when to take money out of your account. You may disagree on your overall approach to household finances.
Have a plan for handling disagreements, such as sitting down, laying out the pros and cons, and compromising to find common ground.
Keeping Your Money Totally Separate
There’s no rule that you have to open a joint bank account. Just the same as your partner, you have the right to open an individual account.
With a separate bank account, you’re in full control. This gives both individuals the opportunity to manage their money however they best see fit.
But there are two questions to answer:
- How will you pay for household expenses?
- How will you save money for the future?
Once you answer these questions, you’ll come to understand if individual accounts are the way to go.
When you share everything in a joint account, there’s no “mine” and “yours.” Instead, every dollar that comes into the account — regardless of who earns it — is jointly shared.
Dividing it Up into Mine, Yours, and Ours
Another approach to money management is to divide funds into three categories: mine, yours, and ours.
With this, you each have an individual account. You also open a joint fund that the two of you contribute to.
The Main Earner Pays the Partner an Allowance
In this scenario, you opt for an individual account out of which the main earner pays their partner an allowance.
This approach only works if the two of you are on the same page. For example, if you’re the main earner and you suggest this strategy, your partner may begin to feel inferior.
Don’t Jump Straight into the Deep End
Even if a joint bank account sounds like a good idea, don’t dive in until you discuss the pros and cons.
Once you do that, you can open a joint account and slowly acclimate yourself to using it as a couple. When you both have access to money in the account, you’ll begin to see if any problems arise.
What if Your Partner is Spending Too Much Money?
The best thing you can do is have an open and honest conversation about your concerns. And if that doesn’t work, it may be time to talk about closing the joint account.
Protecting Yourself and Your Family
You have many financial goals, with one of the most important being protecting yourself and your family.
This goes along with protecting from a partner that’s spending too much money. You need to do what’s best for you.
Avoid Joint Debt
Just because you have a joint bank account doesn’t mean you should also take on joint debt.
This is also a big decision. There are times when it makes sense, such as buying a house with your spouse.
There are also times when you should avoid joint debt, such as signing for a vehicle with a person you just started dating.
Keep Your Credit Card to Yourself
It’s best to pay joint expenses out of a joint checking account. Doing so with a joint credit card puts you in the line of fire, as you’re both equally responsible for the balance.
Protect Your Credit Rating
There aren’t many things more important to your finances than your credit rating.
Do whatever it takes to protect your credit rating, even if that means separate finances across the board.
Tips for Managing a Joint Bank Account
There’s no exact science to managing a joint bank account, but there are some things you can do to prevent trouble.
- Regularly talk about your finances
- Review your spending and savings every month
- Keep both a joint bank account and separate accounts
- Have a clear plan for paying joint expenses
- Keep a budget for more efficient management of household bills
How Much Should You Put Into Your Joint Account
This comes back to the point that there’s no one size fits all approach.
You could both put all of your earnings into a joint account. Or you could each put 50 percent into a joint account and 50 percent into separate accounts.
It may take some time to determine how much you should put into your joint account. Don’t be shy about experimenting.
Setting Financial Goals as a Couple
As a couple, you should be aligned in regards to your short and long-term financial goals. You may totally agree on which goals to set and how to reach them, but all goals should be set together.
Joint Bank Accounts – the Pros and Cons
There are both pros and cons of joint bank accounts, all of which you need to take into consideration.
- Pay household bills more efficiently: It’s more efficient to manage household finances and pay joint bills with a joint bank account.
- Greater transparency: There’s no hiding money with a joint bank account. Both of you can see every transaction.
- Deal with emergencies more quickly: No questions about who will pay for what if there’s an emergency, such as the need for an immediate home repair.
- Easier to work together as a team: This gives you the opportunity to work together to reach your financial goals.
- Lower banking fees: Two accounts have more bank fees than one account.
- Less freedom: With both individuals having access to a joint account, there’s less financial freedom.
- Potential for more arguments about money: When money is combined, there’s greater potential for an argument.
- More difficult to manage during a split: If you split, it can be challenging to decide who gets what from a joint bank account. Even if you contributed more funds, the balance is typically split down the middle.
Frequently Asked Questions (FAQs)
Here are some of the most common questions associated with joint bank accounts:
Can a joint checking account affect credit?
Check account balances do not appear on your credit report.
What should I do if my partner is trying to push me into a financial decision?
Share your feelings and attempt to compromise. If that doesn’t work, you should hold off for the time being. There’s never a good time to be pushed into a poor financial decision.
Can unmarried couples have a joint bank account?
Yes. Any two individuals who qualify can have a joint bank account.
Can you transfer money from a joint account to an individual account?
This depends on the bank, but in most cases, the answer is yes.
Can you convert an individual account into a joint account?
This depends on the bank. Speak with your financial institution about the steps involved with converting an individual account to a joint account.
What is the maximum number of joint accounts a person can have?
There is no limit on the number of joint accounts an individual can have.
Can I remove myself from a joint bank account?
Yes. If you want to do this, contact the bank about the steps you must take to relinquish your rights.
What documents are needed to open a joint account?
Generally, the two of you must provide proof of identity and basic personal information. For example, a photo ID and Social Security number can prove that you are who you say you are.
So, what do you think? Should you put all of your income into your joint account?
Some couples opt for this approach as it allows them to create and follow a budget. Others would rather keep their finances separate, at least for the time being.
Only you and your partner can make the final decision regarding a joint bank account. Take your time, consider the pros and cons, and take the best action for the two of you at the present time.