Understanding joint bank accounts - How do they work?
Friday, 8 June 2018
In most families, more than one person spends money.
More than one person might pay the bills. And more than one person needs access to cash. The term "joint account" simply means more than one person's name is on the account and can utilize it.
Joint bank accounts vs. individual accounts
An individual bank account is opened by one person and owned by that person, and the funds can only be accessed by that individual. With a joint account, there are two or more owners, and all the owners of the account have access to the funds.
For example, with joint checking accounts, each one of the account owners can have their own debit and ATM card, and their names can be on the account checks. Each person on the account can also make deposits into the account, including direct deposits from work and other sources.
Joint account holders typically can access the account without the consent of the other person or people on the account, which can lead to issues such as overdrafts. Communication between account holders can help prevent the unexpected. In some instances, linking a savings account to a checking account or using financial tools such as mobile banking alerts also can help prevent overdrafts of joint accounts.
When are joint bank accounts typically used?
Joint Bank Accounts for Couples: Frequently opt for a joint checking account to manage household finances and daily money management. Both partners can have salaries directly deposited into the joint account, use account debit cards, ATM cards, and checks. Having a joint account can simplify financial management, give both partners equal visibility into the family finances, and save money because they only have to pay for one account (if monthly service fees apply).
Joint Bank Accounts for Students: Parents with teenagers or college students often use a joint checking account — owned by both the parent and the child. Think of it as a checking account with training wheels. The child learns to manage money while the parents can monitor the account to avoid costly missteps such as overdrafts. A parent also might use a joint savings account to encourage a younger child to save. For example, parents can offer to match the amount the child saves so the account grows faster and the child sees the value of saving.
ADULT CHILDREN: Joint bank accounts are also ideal for people with aging parents for many of the same reasons mentioned above. With a joint account, the aging parent maintains financial independence, and adult children get reassurance because they can monitor the account and help out with bill-paying responsibilities if needed.
Other types of accounts, such as Money Markets, Certificates of Deposit, and investment accounts, may have multiple owners (usually spouses) because the money belongs to both parties. If one of the account owners dies, the other account owner(s) still has access to the funds.
How do you open a joint bank account?
A joint account is opened in basically the same way as an individual account. However, each person to be named on the account — the joint owners — must be present or available when the account is opened.
If you are opening the account in person at a bank branch, each person named on the account will need to be available to provide required personal information such as identification and proof of address. Each account owner also will need to sign a signature card, which is a document the bank keeps on file to identify the signature of account owners.
You can also open a joint account online with many banks. But again, each person named on the account may be required to complete online documentation and possibly speak to a bank representative on the phone before the account can be opened.
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