This guide will give you an in-depth explanation of what a joint account is exactly, the benefits that come with it, as well as the risks of getting one.
Making informed financial decisions is crucial because they can significantly impact your financial well-being and, when it comes to joint bank accounts, the financial well-being of your potential partner/s.
A joint account is a bank account managed by two or more people, where every co-owner has equal rights and responsibilities.
Getting a joint bank account can simplify banking for people who share expenses and saving goals.
However, it also poses risks of financial disagreements and conflict when not managed appropriately.
Trust, transparency, and communication are essential for maintaining a joint bank account.
What Is a Joint Account?
A joint account is a bank account that, in most ways, is just like any other personal current or savings account, except it can be managed by two or possibly more users. They can be romantic partners, a parent and a child, business partners, or any other group of people who want to have equal control over a single bank account.
Contrary to popular belief, joint accounts are not reserved specifically for married couples, as marital status is not an eligibility requirement for getting them.
An authorised user is a person who is granted permission by the account holder to use a credit card or a line of credit linked to their bank account. Authorised users don’t add funds or make payments to the account and are not held responsible for the potential charges.
With joint bank accounts, the funds belong to all owners. This means that everyone whose name is on the account can make withdrawals and deposits, make payments, write checks, etc.
At the same time, this also means that each owner is equally responsible for the account and liable for the fees, overdrafts, and debt associated with the account, regardless of which partner initiated the transaction.
Like any other financial service, joint accounts come with their own benefits and risks, but in some situations, they can serve various purposes:
Sharing Expenses – Probably the most popular reason to open a joint bank account is to easily share recurring expenses like rent or mortgage, utility bills, groceries, etc.
Convenience – Beyond sharing expenses, joint accounts provide extra convenience by eliminating the need to transfer funds between two accounts for any other reason.
Managing Shared Savings – Besides making payments, joint bank accounts can also be used for savings. They are especially handy for shared saving goals like deposit for a mortgage, a vacation, a child's education, etc.
Building Credit – Joint ownership allows two or multiple account holders to build credit simultaneously using one account, given that they are financially responsible.
Estate Planning – Not the jolliest of occasions, but in the case of the untimely death of one of the holders, the other quickly gets ownership of the assets without the need for probate proceedings.
Different Types of Joint Accounts
If you’re looking to open an account in joint names, there are several different types of accounts available to you.
Joint current account
The most well-known of the lot, a joint current account gives you the essential banking tools of a standard current account held in joint names. Current accounts provide you with access to debit cards, ATM withdrawals, budgeting tools, and sometimes access to an overdraft.
Joint current accounts are ideal for people who want to share expenses together. They’re particularly popular among cohabiting couples, a parent and young child, or a child and elderly parent.
Joint current accounts are commonly offered by traditional high street banks like HSBC and Barclays, but also by some of the best online-only banks like Monzo and Starling (if you're interested, we also compared Monzo and Starling side by side).
Joint savings account
Joint savings accounts provide a great way for two people to grow their savings together.
Most financial institutions that provide multiple savings accounts will offer at least one of these as a joint savings account, but there may be criteria you need to meet before you can open one. For example, both account holders may need to have an account with the institution already, either a joint account or a single account each.
Joint savings accounts are useful for a number of reasons, including:
For couples to meet savings goals together like buying a house or saving for a holiday,
For children of elderly parents, allowing you to assist with bills and account management without needing power of attorney,
For parents of younger children to help teach healthy financial habits or easily share funds with a student staying away at university.
Remember, both parties will have equal access to all funds in a joint savings account, meaning either party will be able to deposit or withdraw funds from the account without the other needing to approve or be informed of this.
If you'd like more options, we also list the best bank accounts for kids and students living in the UK.
Joint fixed deposit account
Joint fixed deposit accounts are very similar to joint savings accounts but are not as easily accessible. The funds deposited in a joint fixed deposit account can’t be accessed by either account holder until the fixed term of the account has been reached.
These accounts also provide fixed interest rates, which are often higher than standard interest rates on joint savings accounts.
Joint investment account
Some investment accounts can be opened in joint names too. A joint investment account is a financial tool allowing both account holders to hold money in a fund that invests in stocks, shares, and other assets together. As the account is held in joint names, both account holders share the risks and rewards of their investments equally.
Joint mortgage account
A joint mortgage account allows both parties to make payments and manage the expenses of a mortgage loan. As well as this, a joint mortgage account allows both parties to combine their savings and submit a larger mortgage deposit when purchasing a home, allowing them to access better mortgage rates.
As with all joint accounts, both parties are equally responsible for the debt and its repayment.
Benefits and Risks of Joint Accounts
Regardless of the type of account and what purpose it serves, there are a few advantages that all co-owners of a joint account can enjoy, as well as disadvantages that everyone involved should be aware of.
- Convenience and Ease of Sharing Expenses - Using a joint bank account simplifies record-keeping and allows multiple users to have the same overview of the transactions, expenses and contributions. It also simplifies bills payment by allowing users to use a single fund for all expenses. Finally, it eliminates the need for transferring money to their individual accounts.
- Increased Transparency and Communication About Finances - With joint bank accounts, responsibility is shared between the holders, so it encourages transparency and communication. Moreover, by unifying transaction history, it puts partners on the same page, making communication much easier. As a result, it can inspire and motivate the co-owners to discuss financial planning more frequently.
- Ability to Pool Resources for Larger Expenses - Being able to pool resources in a joint account can drastically increase the purchasing power of the account holders, allowing them to consider larger investments and reach more ambitious saving goals easier than alone.
- Improved Financial Management for Couples - All of these benefits together can provide a sense of unity and improve the way couples manage their finances. By having them share responsibilities and encouraging them to cooperate and communicate, a joint bank account can help both partners build a stronger financial future together.
- Financial Disagreements and Conflicts - Partners with vastly different spending habits might have a hard time sharing a bank account. Unless they’re willing to compromise and agree to an equal contribution, a joint bank account may not be the best idea for such couples.
- One Account Holder Misusing or Draining the Account - As all co-owners have total control over the funds in the joint bank account, nothing stops one of them to drain the account without the permission of the others. People often feel this risk doesn’t apply to them as they can trust their partners. Still, it happens, whether due to negligence, unexpected financial difficulties, or even personal disputes.
- Potential Negative Impact on Credit Scores - With joint bank accounts, the financial practices of one co-owner affect the credit of everyone whose name is on the account. This means that if one of the partners is late for a payment, or overdraws, the individual credit score of each of the co-owners will be negatively impacted.
- Considerations for Unmarried Couples and Business Partners - Even though marital status is not an eligibility requirement, getting a joint bank account as an unmarried couple or with a business partner can be trickier than when spouses do it. Married couples have certain legal protections that no other group has, so the legal implications in the event of a separation or a dispute need to be considered.
According to the relevant laws, every partner has a right to an equal share of the funds held in a joint bank account, and this applies to married and unmarried couples.
However, only spouses have the right to inherit property and assets from each other without paying inheritance tax. In other words, if one of the partners was to die, the other partner can easily gain full ownership of the account without jumping through legal hoops.
For unmarried couples, it may not be so easy as they are not protected by this right. In their case, if one of the partners dies without leaving a will, the surviving partner may need to go through a complex and costly legal process to establish their right to the assets.
Having a Joint Account While Keeping Finances Separate
Starting a joint account with someone doesn’t necessarily mean sharing every last penny together. Couples or business partners can have a joint bank account and maintain their personal accounts to keep some of their finances separate.
In fact, maintaining a personal account while owning a joint account with someone can be very beneficial and provide a sense of autonomy and financial independence. It allows each holder to prioritise their personal financial goals and spend money on personal expenses without feeling guilty or having to justify their spending to the other.
However, one potential drawback of keeping finances separate is the risk of abuse of this financial autonomy by one of the holders. If one partner starts spending too much alone and forces the other to cover their shared expenses, it can erode the trust in the relationship and cause conflict.
This is why transparency and communication are key to maintaining a joint account and keeping finances separate. As long as the partners can find an agreement on the amount and frequency of contribution from each individual, and stick to it, managing both types of accounts should not raise any problems.
Here are a few tips that can help you control the risk:
If you or your partner have a significantly larger income than the other, you can either contribute more or an equal percentage to the joint account. They are both valid and fair options. More importantly, regardless of what contribution percentage you decide, make sure you stick to the plan every month.
Each partner should be able to spend the funds from their personal accounts on their own personal expenses without being pressured by the other, as long as they meet their joint account responsibilities.
Discuss the details of your shared expenses with your partner regularly and make necessary adjustments. If an unplanned expense, like home repair, suddenly emerges, discuss it to come up with a solution you both agree on.
The Bottom Line
In summary, getting a joint bank account can be advantageous as it simplifies finances for people who share expenses or savings goals. On the other hand, when not managed properly, shared responsibility can lead to disagreements and conflict, which can be difficult to resolve, particularly if the relationship breaks up.
This brings us to the conclusion that joint bank accounts are best utilised by people who are transparent with each other, communicate freely, and enjoy a high level of mutual trust. If you have someone in your life that meets these criteria, getting a joint bank account with them could be the right call for you both, and help you manage your finances together.
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