What Do You Put In A Joint Account With Your Partner? Here’s What To Keep In, & What To Leave Out
Sorting out finances as a twosome can be tricky. If you find it hard to agree on whether to have pizza or stir fry, or what to name the cat, you may find that keeping your finances separate in a relationship is the best thing for you. However, if you do decide create a joint bank account with your partner, experts say there are definite guidelines to what should — and shouldn't — be put in them. Before you lump all of your earnings and savings together and hope for the best, it's a good idea to do some research into what works for you and your partner.
Joint bank accounts can reveal all your spending patterns to one another, so relationship expert Ray O'Neill explained to banking organization EBS that they can be a good indications of issues around money. “If your partner misses a couple of payments, [are they] going to do the same with the mortgage? The important thing is to get the conversation about money started. Too often people are afraid to talk about it and things then flare up later.”
Getting a joint bank account and actually using it is an expression of trust and commitment. Figuring out what actually works for you as a couple as an individual is a journey, but these tips can help.
Use It For Savings For Big Shared Purchases & Investments
Joint bank accounts can be helpful for big things you'd like to do or achieve together. "You can use a joint account to pool your money together. This is helpful with both saving — you can save toward shared goals, such as a new home or vacation— and spending," Better Money Habits wrote. Joint bank accounts keep your contributions in one place.
However, HerMoney points out that it's a good idea to know what the goals for your money actually are. "Maybe your short-term goal is to take a vacation next year and your long-term goal is to buy a house. Make sure your partner not only knows about these plans, but is on board with them. When you’re both saving toward the same goal, you will get there faster." There's no point saving money together if you're actually saving it for different things.
Use It For Fair — But Not Necessarily Equal — Contributions To Life Together
This is what most people use joint accounts for: sharing expenses for day-to-day life, like groceries or rent. However, HerMoney explains that committing 50-50 isn't actually sensible unless both partners have exactly the same income. They suggest a system based on equity, rather than equality. "Make a list of all your combined expenses: housing, taxes, insurance, utilities. Then talk salary. If you make $60,000 and your partner makes $40,000, then you should pay 60 percent of that total toward the shared expenses and your partner 40 percent. For instance, if the rent is $1,000, you pay $600 and your partner contributes $400."
Yes, this requires you to be transparent about how much you earn and do some real reckoning with what you spend each month on joint stuff, like Netflix and PostMates, and what you spend on yourself. Sharing a bank account means being frank about money and what your life really costs.
Use It For An Emergency Fund
Stuff happens — and often it can't be covered by insurance right away. Joint accounts are a good resource for padding for emergencies like this. "An emergency fund is a pot of accessible money that you have set aside just in case an expensive accident comes your way. That means the money has to be in your bank account or in cash, not tied up elsewhere," explains Simple Finance. The amount depends on your income, but experts advise having a significant chunk — and both partners can contribute.
Keep Personal Spending Money Separate
Some people keep some personal spending money separate in their relationship. My partner and I do this; we retain personal bank and savings accounts, and have a joint account for joint expenses. "Some couples feel more comfortable keeping their individual accounts. Keeping your separate accounts as they are grants each person the freedom to control the money he or she earns. This is helpful if partners have different spending habits; being able to manage money in one’s own way gives each person a stronger feeling of financial ownership," explains Better Money Habits. Banks also reward loyalty. Switching from a long-term individual savings account where you've earned a high interest rate to a new, joint one where you're getting a low rate doesn't make much sense.
Keeping a bit for oneself is also a good idea for financial independence; a survey in 2015 found that fewer married women than married men in the U.S. have helpful personal savings. Safety and privacy are also paramount with individual accounts. If you have a joint account, explains NerdWallet, "both holders can see transactions in the account, which can present privacy issues." A joint bank account will only work when you can trust your partner financially.
Stay Separate If One Of You Has A Low Credit Score Or Debt
This can be a rough conversation to have, but it's an important one: If one partner has seriously a low credit score, a history of bankruptcies or a lot of debt, it's best to keep your accounts separate. "Separate accounts can also be helpful if you and your partner are in different places financially. For example, if one partner is carrying a lot of debt or has mismanaged money in the past, a degree of separation can provide a sense of security for the other person — at least until the debt is paid off," explains Better Money Habits.
Paying off their debts as a team doesn't mean you need a joint account, and third parties can take money from the joint account for outstanding debts if they need to — which doesn't help either of you. If you're both in a tight money situation, talk to your bank about your debts and whether it would suit your finances and repayment plans better to remain separate or join together.
If you're ready to jump into joint bank accounts together, be ready to have some very intimate conversations about money — and not hold back secret debts or problematic credit. Going for a joint account means everything has to be on the table. Yep, even your habit of buying expensive swords on eBay at 2 a.m.