Should you open a joint bank account with your partner?

Traditionally when a couple got married, they would usually also intertwine their finances and take a ‘what’s mine is yours’ approach to money. Now, Australians’ attitudes towards combining finances with their significant other appear to be shifting.

According to a 2018 survey by ME Bank, younger married or de facto couples are less likely to have joint bank accounts compared to older generations. The poll of 2,000 customers found that 76% of Baby Boomer couples shared a transaction account, compared to 70% of Gen X, 68% of Gen Y and only 54% of Gen Z. 

Given their apparently declining popularity, is opening a joint account with your partner still a good idea?

What is a joint bank account?

A joint bank account is one that has two account holders, both of whom can deposit into and withdraw money from the account. 

Joint accounts typically take the form of either a transaction account or a savings account. A joint transaction account can be used to make joint payments such as mortgage, rent and other bills easier to manage. A joint savings account could be helpful for couples saving for shared short- and long-term goals such as a holiday, a car or a home deposit

Joint bank account
A joint savings account may be helpful for couples saving for shared goals like a holiday. Source: 4 PM production (Shutterstock)

How do joint bank accounts work?

Depending on the type of account, you may need permission from both or only one account holder to access the funds. As ASIC’s MoneySmart explains, there are two types of joint accounts:

  • ‘Both to sign’: can only transact when both account holders sign or approve. MoneySmart notes this may be a better option if you are concerned about security. 
  • ‘Either to sign’: can transact when either account holder signs. This allows both partners to access the account independently and so it could be a more flexible but less secure option in comparison.

As a rule of thumb, Westpac says most accounts are typically ‘either to sign’. If you want a ‘both to sign’ account, you’ll usually need to arrange this with your bank. 

What are the benefits of joint bank accounts?

Joint bank accounts can make it easier for couples to manage shared day-to-day expenses (like rent and groceries) and save towards shared financial goals (like a car or a house). 

They can also potentially help to streamline legal affairs. For example, in the event that one partner dies, the other will normally be able to access the funds in the joint account without having to go through the legal system. 

Joint accounts can also have financial benefits. For example, you may pay fewer fees with one account compared to having two separate accounts. Additionally, if you open a joint savings account, it may also be easier to meet any bonus interest conditions. For example, some banks pay bonus interest if a certain amount of money is deposited into the account each month. It may be easier to meet this condition with two incomes. 

Lastly, having a joint bank account can add financial transparency to a relationship – both partners will know exactly what is going in and coming out of the account. According to the ME Bank survey, 72% of couples said having a joint bank account had helped them to build trust and a closer relationship. 65% of couples also said joint accounts made them more accountable to sticking to a budget or plan. 

Joint bank accounts
A joint bank account may help to build trust and a closer relationship. Source: UfaBizPhoto (Shutterstock)

What are the risks of joint bank accounts?

Of course, there are also potential downsides to opening a joint account. One of the top risks being that one partner could withdraw all the money from the shared account (if it’s an ‘either to sign’ account) and the other partner may have limited recourse. 

There’s also the risk that one partner could rack up a large debt using the account, such as through excessive spending on a linked credit card. According to MoneySmart, both partners would be legally responsible to pay off this debt and this could negatively impact the credit score of both you and the other account holder. 

A joint account could also be a source of tension in your relationship if you and your partner have different spending habits, or if one of you earns more than the other. Additionally, while a joint account may encourage transparency, the other side to this is that you may feel a loss of privacy and a loss of financial independence. 

How to manage your cash as a couple 

Joint bank accounts can work for some couples, but others may find it better to keep their finances separate or take a blended approach.

Canstar’s money expert, Effie Zahos, says there’s no ‘one size fits all’ solution, but it is important to talk about money with your partner.

Here are four ways of handling finances as a couple that Ms Zahos says could be suitable, depending on your relationship.

1. What’s mine is mine

This is where you keep your earnings and bank accounts separate. You may decide to open a joint bank account for joint expenses, or you may decide to pay bills directly from your own separate accounts.

This requires working out what your joint expenses are and deciding how you want to split the bills. For example, you could go 50/50 or, if you have different salaries, you could split bills according to a percentage of your income, Ms Zahos says. 

2. What’s mine is yours and yours is mine 

In this approach, couples share all their finances in a joint account. This may work for couples who want to keep an eye on everything going in and out and who have similar spending habits. 

To help avoid any arguments down the track, it can be a good idea to agree on rules around how much each of you can withdraw from the account before you need to consult the other, Ms Zahos says.

3. Your shout but it’s no favour

Here, one partner pays the other an allowance and they also share a joint account for bills. This may work if one of you is the homemaker, or if one partner earns considerably less than the other. The allowance should not be seen as a favour, Ms Zahos warns. 

Couples should agree what the allowance will be used for. For example, if it will go towards bills and groceries it would be a larger amount than if it is just for personal expenses, she says.

4. I’ll take care of that, you take care of this

In this approach, each partner picks a bill or expense that they will pay for – these may not necessarily equal the same amount. This may be suitable for blended families or couples that have financial commitments outside of their relationship, such as student debt.

To prevent arguments in the future, couples should talk about how their separate bills and expenses may impact their ability to reach their joint financial goals, Ms Zahos suggests.

Main image source: GaudiLab (Shutterstock)

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