My significant other and I share just about everything - groceries, bills, rent, household expenses, a couch payment - but we don't share a checking account. For some, it works, but for us, it's easier to keep our accounts separate. While there are many plus sides to joining accounts, there are also a few downsides to consider before merging your funds into a joint checking account.
First of all, what is a joint checking account? It's an account (obviously), where you deposit money (again, obviously), where both people on the account can contribute, and have equal rights to use the funds it holds. It's a checking account for two, not only for couples, it can also be good for parents and their teenagers, or kids and their aging parents.
- Shared expenses.
- Equal contribution.
- Easier to track spending/contributions for each partner.
- Joined financial management.
- Loss of privacy.
- Spending on the account can't be controlled by either partner, so one person could drain the account.
- A partner could overdraw the account, meaning potential fees for which both partners are responsible.
- If one partner has unpaid debts, creditors can pursue money in the account for settlements.
Obviously having a joint account requires trust between partners. If you both feel confident with each other's spending habits, joining accounts may be a good idea. On the other hand, it won't hurt to wait. There are other ways of "joining accounts," or joining funds without opening a joint checking account.
DON'T BECOME THE SOLE CONTRIBUTOR
Sharing expenses means that both partners contribute equally, and spend the funds on shared expenses, unless you have other agreed upon terms. If you're worried about it, talk to your partner first. Here are a few tips to make sure that both sides participate equally.
- Set a date every month where you will both contribute equal funds.
- Set the rules before you open an account. For example: decide the bills and expenses that will be paid with funds from the account.
- Set spending limits, and determine who is doing the shopping or bill-paying. If you don't have automatic transfers established for bill pay, figure out who will pay the bill that month. Having two people paying the bills, or grocery shopping, may mean that you pay twice, or overdraw on your account. Neither of which is a good thing, and can be avoided by communicating with your partner.
- Respect each other (no shopping sprees or revenge buys). It could put you both into an uncomfortable or even difficult financial situation. Remember, you're both responsible for the account.
- Keep track of spending. With online banking, it's super easy to check the activity in the account. Keep an eye on who is spending what, and how the funds are being used.
- Talk about it. Open communication about who is buying, spending, and contributing, can help to ease any sense of worry.
- You're both responsible. If you overdraw on your account (spend more than you have), you may be charged a fee. Having both people on the account means that both are responsible.
- Have a plan for ending the account. If you and your significant other decide to end your relationship, having a plan for ending the joint account beforehand will eliminate hard feelings or questions about how to handle the funds in the account.
Sharing an account is a big deal, and there are certainly other ways to share expenses without opening a joint checking account. Make sure that you both understand the pros and cons, and that you are ready to merge your funds.