Joint checking accounts – When they do and don’t make sense

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Marriage is a big step in anyone’s life and often couples take some time in working out the initial kinks. Management of household finances is one such important aspect that needs consideration after tying the knot. If you’ve been always used to keeping separate accounts for your income and expenses, it may get slightly difficult for you to let go, and work out a feasible solution to keep everyone happy! Hence, opening a joint checking account may or may not be helpful in this kind of and a few other similar situations.

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Let’s go over some of the potential drawbacks and practical benefits of opening joint checking accounts in different situations.

In case of elderly parents

When people reach beyond a certain age, they’re usually unable to handle their finances and accounts. So, they may not be able to keep track of the bill due dates if they’re living together with their children.

More uncertainty and confusion may get created, owing to financial burdens, if they choose to relocate to some nursing home or assisted living facility. It may make more sense for such people to share their financial responsibilities with an adult child at home.

When it may not make sense

Many financial experts warn against getting into such kind of setup with adult children. Although having a joint account with an adult child may seem like a harmless decision initially, and more like a gesture of trust and love, the financial implications can be quite negative for both the child and the parent. First and foremost, there could be shared liability issues if either individual (in the joint account arrangement) gets into some financial trouble. In addition, it may lead to unexpected gift taxes too.

Hence, many financial experts suggest elders to execute a power of attorney instead and use it for granting access to checking accounts and other financial assets, to their adult children.

In case of couples

In many cultures, its common practice among couples to combine their assets after getting married. There are several reasons why two people living in the same house may find using a joint checking account highly advantageous. Maintaining one account for all bill payments and grocery purchases makes it easy to keep track of monetary outgo each month.

Marriage experts also believe that having this kind of setup can serve as a useful means for maintaining a healthy relationship. Some experts suggest having both names on actually all of the accounts, as doing so can do away with any trust-related issues. Even couples who haven’t gotten married yet can share their financial responsibilities by opening a joint checking account.

Going by the United States Census Bureau data, as many as 8.3 million unmarried United States citizens were in a live-in relationship in the year 2015. These couples are suggested to maintain two checking accounts: a personal one for their own personal expenses, and a joint one (in both names) that can be used for depositing a certain share from the paycheck each month, towards shared expenses like utilities, vacations, rent, emergencies, big purchases and more. The shared amount to be deposited into the joint account must be decided mutually by the two partners.

The reasoning behind having a personal account too is that an individual may have certain assets that he/she’d like to handle separately, on his/her own, without involving the partner. Regardless, what’s most important is that both you and your partner are aware how much the other person is depositing into the shared account, and the amount he/she is withholding for his/her personal expenses.

When it may not make sense

No matter how strong a relationship you may share with your partner, it’d usually always be vulnerable when it comes to financial matters. Although a joint checking account can resolve some of the issues, at least partially, it may also end up contributing to them.

Women who give up their checkbook rights post their marriage can often end up feeling resentful about such decision. Another possible problem arising from joint checking accounts is one partner having different spending habits than the other. For instance, while one may prefer spending money occasionally, whenever there is a special occasion, the other may although not be a spendthrift, but may cut loose every now and then, especially during the weekends.

Such different spending habits can result in tensions among the couples. Maintaining separate accounts can give these couples the flexibility of spending their money as per their personality.

In case of minor children

Although teenagers are usually allowed to open and operate checking accounts, the parents are obligated to keep a constant track of the goings-on in these accounts. Opening checking accounts for youngsters can be a good learning experience for both child as well the parent.

The younger ones can get around various tasks associated with checking accounts, and learn how to write checks, deposit money and balance accounts. The parents on the other hand can hone their supervision skills by keeping constant check on these accounts while granting enough independents to the youngsters.

Many parents opt for joint checking account route to monitor their children’s account activity. Having such arrangement can go a long way in building trust. Both parent and child can take comfort from the fact that the other individual is responsible with his/her money.

When it may not make sense

Many experts feel that there could actually be many negatives arising from such jointly held checking accounts too. Even slight bit of irresponsibility on part of the children can lead to an empty bank account for the parent, not to forget the various financial issues arising from it. Furthermore, both the joint checking account holders are assessed for the personal liabilities like credit card debt.

Final thoughts

You must carefully weigh all the pros and cons when considering opening a joint checking account with an adult child, a minor or a partner. No matter how important it may seem, you must never get into a joint checking account arrangement with anyone unless you have absolute trust on him/her.

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