Monday, 20 May 2019

Couples with separate banking lives may wonder whether it makes sense to combine their funds in a shared account.

A joint checking account, like many financial options, offers benefits and potential risks. And like other choices, the answer depends on the circumstances, needs and personalities of those involved.

Celebrity financial guru Dave Ramsey, a critic of separate bank accounts in marriage, believes joint accounts force couples to cooperate and communicate on their money choices and overall life goals. (He goes as far as saying that a spouse's desire for a separate account could possibly signal relationship trouble.)

On the other hand, financial advice personality Suze Orman recommends a joint account as just one leg of a "yours, mine and ours" money approach that includes at least three separate checking accounts, with the "ours" bucket used for all household expenses. The "yours" and "mine" accounts allow couples to avoid spending arguments, she advises.

Given that no two marriages are the same, and that married couples aren't the only sets of people who can share a checking account — family members, friends and unmarried partners can pool their funds this way, too — you might explore the various pros and cons of joint checking accounts before deciding if it's the right choice for you.

The pros?

Simplicity, Transparency

A joint checking account makes it easy to pay, plan and track household and other common expenses. Both account holders can see how much money there is and where the funds are going. A joint account may simplify your budget process. And, as proponents say, a joint account should promote transparency and conversation about finances and goals.

"Each party has full access to and opportunity to be fully aware of the money flow. It's easy to track. There are no secrets," South Dakota-based certified financial planner Rick Kahler wrote on his blog.

Joint accounts also can help avoid needless financial hassles in the event of an emergency, such as a sudden serious illness that requires a spouse to retrieve funds.

Helping Family

A joint account makes it easy for a grown child to help an elderly parent handle expenses, and for a parent to oversee a teen's or young adult's spending and transfer funds in a pinch.

A joint account's very advantages also bring potential downsides. What are some of the cons?

Potential Conflict

Finances are a flashpoint for many couples. If two people don't share the same spending habits, goals or money values, a shared checking account could create or exacerbate conflict. Even partners who get along well may bristle at all the joint decision-making and transparency.

As Kahler wrote, a joint account may work well for couples with a share-everything outlook, but not so much when one or both people in the relationship prefer independence and control over their spending. A joint account often "doesn't work well in second marriages or where both parties have careers," he wrote.

Potential Risk

If the partner, child or friend you share the account with proves reckless or untrustworthy, you risk losing your funds and incurring bank fees. Both parties have equal access to the cash, regardless of how much each contributed.

In a worst-case scenario, one partner could empty the account. And a financially troubled partner who winds up with a lien or garnishment on his or her assets could create money problems for a blameless joint account holder.

The combination "yours, mine and ours" approach may provide an ideal mix. With one joint account and two separate accounts, you can enjoy togetherness, autonomy, transparency and security for many couples and families. Regardless of your money values and style, it's important to talk with your partner about the approach that works best for your finances and your personal relationship.

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