Exploring Millennial Finances: The Benefits of Joint Accounts for Unmarried Couples
When a couple joins forces financially, it’s usually to achieve a common savings goal or to contribute to shared expenses, such as a family home. B. to expenses that arise from living together.
This is a typical move for married couples, but more and more unmarried couples are taking the plunge to combine households: the number of unmarried partners living together nearly tripled from 6 million to 17 million between 1996 and 2017, according to the latest available figures from the US census. From living together to sharing other financial goals, unmarried couples may have questions about how to manage their money together.
One way to streamline joint spending is to open a joint bank account, which can simplify the way you pay jointly. If you are considering opening a joint bank account with your partner, you should think about the pros and cons of this option.
BENEFITS OF A JOINT ACCOUNT
Joint accounts can be useful for managing regular expenses as well as longer-term financial goals. Maybe you and your partner want to make it easier to pay for your rent and utilities together, or maybe you want to save for a vacation, wedding, or house together. A joint account can be a useful place to start, as long as you set some ground rules together about how much you want to contribute, how you’ll use the money in the account, and what you’ll do when your relationship ends.
Taylor Kovar, a certified financial planner and CEO of TheMoneyCouple.com, says unmarried couples should be very careful when opening a joint account. There are not as many legal protections as there are for married couples, who have inherent legal co-ownership of assets acquired by the couple after marriage. He says it’s safe to keep separate accounts and then open a separate joint account that you and your partner both contribute to.
“There needs to be very transparent tracking of the account,” says Kovar. “Both people should be able to access the account at all times. You should both agree on what the account can and cannot be used for so that in the event of a dispute you both know what went wrong.”
DISADVANTAGES OF USING A JOINT ACCOUNT
The biggest disadvantage of a joint account is the dreaded question: what do we do with this account when we split up?
Separating is hard enough, but when it comes to shared assets, things can get even harder. According to Kovar, the easiest way to manage a joint account after the breakup is to simply halve the funds. But if one affiliate has contributed more than the other – perhaps because that affiliate has a higher salary – then it may be a good idea to split it fairly based on the percentage each affiliate contributed to the account.
April Lee, the financial blogger behind HassleFreeSavings.com, is grateful that she and her former longtime partner never mixed up their finances, especially when it came to the house she bought but where they both lived. He consulted an attorney to try to sue for the property after the breakup, but was ultimately unable to show that he had a financial interest in the house.
“He couldn’t prove that even a penny went into common assets,” says Lee. “Not having joint finances saved my bacon.”
JOINT ACCOUNT CREATION
If you decide to open a joint account with your partner, you need to look for accounts that can be jointly owned. Once you have made up your mind, check with the bank what documents and ID you will both need to become joint owners of the new account.
You may also want to ask your bank if there is a way to set a withdrawal limit for the account. If one person wants to withdraw beyond the set limit, the other partner must also approve it.
Once the joint account is set up, it can be used for whatever you and your partner have agreed upon. Maybe you use the online bill payment account to cover your common expenses like internet, streaming services or rent. Or maybe you’ve determined how much you’ll contribute to each Hawaii beach trip, and you’ll put money into the account until you’re ready to book flights and a hotel.
The decision to open a joint account with your partner is deeply personal. If you decide against it, you have other options, e.g. B. Giving each other money to pay for common expenses. This setup requires a few extra steps, but can help you keep your funds segregated and protected. But when you’re ready for a joint bank account, the most important task is to make sure you and your partner are on the same page.
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This article was provided to The Associated Press by personal finance website NerdWallet. Chanelle Bessette is a writer at NerdWallet. Email: [email protected] Twitter: @crbessette
RELATED LINKS
NerdWallet: Divorce from joint checking account https://bit.ly/nerdwallet-how-to-divorce-your-joint-checking-account
Chanelle Bessette from Nerdwallet, The Associated Press
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