5 must-read tips before opening a joint bank account
With love in the air and Valentine's Day just around the corner, now is the perfect time to consider taking your relationship to the next level - financially that is. Financial compatibility plays a big part in relationships, so when it comes to opening a bank account with your partner it’s important you are on the same page.
But what exactly are joint bank accounts? Simply put, they are accounts that two people can deposit into and withdraw money from, which can be used to manage short term shared expenses such as household bills or to save for common goals in the long term, such as a car or a house.
Whilst joint accounts can be practical ways to reach shared goals, there are also risks involved that should be considered before you dive in. So make sure you read through our list of tips to know before opening an account so that you can make a well informed choice.
1. Do your research
Before you dive in, the first thing you'll need to do is compare and research the types of joint bank accounts on offer and consider the benefits each type would provide for you. There are two kinds of joint savings accounts, each with a different way of accessing your money.
Both to sign - To make a transaction through this account, both parties must sign. This option may offer you more peace of mind, however, if one person is away the other won’t be able to withdraw emergency funds. This is a popular choice for people going into business together or flatmates paying rent.
Either to sign - This account allows either person to withdraw funds at any time without the permission of the other person. It is a flexible option and is good for people who can share their funds freely, for example, a married couple.
2. Know your partner’s financial values
When it comes to deciding whether to open up a joint account, you should both be on the same page when it comes to understanding where you both get your money from, how each of you value money and what your spending history is like.
According to Mozo’s report on Australia’s biggest financial relationship dealbreakers, 4 in 5 people said that excessive spending on gambling, smoking and alcohol would be real relationship enders, which goes to show why having a conversation beforehand could be vital.
Likewise, if one of you is more money savvy than the other, you’ll need to draw up a strategy and set some boundaries to avoid financial arguments so you’ll be able to use the joint account at it’s best.
3. Set up a realistic budget and savings goals
It is important to identify your shared goals and purchases, and then together work out a budget so that you can achieve them. Do you share the same financial goals? Opening up a joint account could be a great idea if you have similar savings goals and can agree on what expenses should be shared.
Setting up a budget is a great place to start, as is working out how much you’ll both contribute to a shared savings goal. For example, you might split it evenly or go 60/40 depending on income.
4. Understand the risks that come with join bank accounts
Having a joint bank account can be a great way to manage shared expenses, however there can be risks involved that need to be considered prior to opening the account. There is a potential loss of privacy as everyone who has their name on the account will have access to the account and can see the transaction history of all people on the account.
As a type of safeguard, everyone should have their own individual bank account as well as a joint bank account. The money in your personal account can be used as play money and personal spending so that it doesn't affect the funds that are used to pay the household bills. Have this stash saved up can also act as an emergency fund, which means you will have the ability to potentially leave an unfulfilling relationship with enough to cover rent or groceries while you get back on your feet.
5. Compare accounts
Once you’ve considered these tips, you’ll be ready to open a joint bank account! But there's one more step to consider first, and that’s grabbing a great rate to maximise your savings success.
But just how much could a different rate affect your balance? Let’s say that Will and Heidi want to deposit $10,000 in a joint account, with monthly contributions of $500. According to Mozo’s savings goal calculator, if they were to put their deposit in an account that has an interest rate of 1.50%, after five years they would have a balance of $41,912. Whereas if they deposited it in an account with an interest rate of 2.50%, they would end up with $43,250 after the same period.
Compare even more bank, savings and term deposit accounts using Mozo’s comparison tables and savings calculator to find a joint account that is right for you and your partner.
