Taking Your Relationship to the Next Level - The Joint Account (Part 1)

So you’ve just entered the fourth year of your long-term relationship. Or have you just gotten engaged to marry? Better yet, you just got married! And with any of the above huge steps in commitment, you have just realised the importance of consolidating your finances. After all, your financial situation will play a huge role in the happiness of you and your spouse, so it’s only natural that you’d want to tackle it together and avoid any financial problems, right?

In addition, the Center for Disease Control of the United States ranks financial problems one of the top ten common reasons for divorce. In Malaysia, statistics have also shown that financial problems are one of the reasons cited for divorce. Hence, it can be said that financial problems if left unchecked, can be a contributing source of unhappiness, disharmony or even divorce.

In this article, we are going to take a closer look at one of the most commonly advocated methods of financial management for marriages: the joint account. Unlike single bank accounts, a joint financial account calls for an additional trust, understanding and cooperation. In fact, it could even be considered a bit more complex than a single bank account! By the end of this series of articles, you will be able to identify the benefits and disadvantages of a joint account and make your own decision whether to have a single or joint account in your relationship.

Firstly, what is a joint account? A joint account, be it a savings or current account, has two (or more) people’s names attached to the account. Both people can make deposits or withdrawals just as they could with a single savings account. Either person is 100% entitled to the money in a joint account at any time. It doesn’t matter who put the money in, how you’ve agreed to manage the money, or who makes more money. If you both signed on the account, either one of you can remove the money ANYTIME. Now that we’ve got the biggest disadvantage (some might say danger) out of the way, let’s take a look at the pros of having a joint account with your partner:

Pro

Easier to monitor

• Keeping track of your combined income is easier because there is no need to switch between different accounts. Having a joint account is also more convenient because you won’t need to transfer money between multiple accounts. This is especially handy if you or your spouse constantly travel (With a joint account, all your spouse needs to do is deposit money in it and you’re ready to go. Transferring between different accounts is inconvenient because it may take more time). Best of all, a joint account makes it a lot easier to monitor both parties’ expenses, so there will be no risk of encountering “surprise” purchases which may need to be explained to your partner later!

Lower cost for maintaining the account

• In the long term, having one account instead of multiple ones can save you some money (in terms of the service and bank charges) because the more accounts you own, the more service and bank charges you may have to pay.

Additional benefits

• Usually, a bank will offer additional benefits in a joint account compared to a single account. For example, some banks offer free annual travel insurance, free personal accident insurance, free upgrade to privileged banking facilities, higher interest/dividend rates and more for joint accounts. However, make sure you clarify the exact bonus, goodies or freebies offered before committing to the joint account because the last thing you want is to be charged with a mysterious or unnecessary banking fee!

Joint account = joint goal

• A joint account makes it easier for both parties to focus on one financial goal. For example, you may set up a joint account with the intention of using the money to go on a holiday together. With both parties being aware of the financial goal and in control of how and when the goal is reached, focusing and cooperating toward the goal becomes easier.

To help your parents/in-laws

• One method of helping your parents or in-laws (especially if they are very elderly) is by opening a joint account with them, especially if they are incapable of doing it themselves. With this method, you can receive their deposits, and you or a caretaker can then pay the bills for them. You also have the power to use the account to settle their outstanding debts, ensuring that your parents or in-laws won’t ever fall behind in their payments.

Finance will not be disrupted in case one party dies

• If something unfortunate happens to your partner and he or she dies, you can at least take comfort in the fact that the money in the joint account will not be frozen. As long as the joint account is still active, any money in the account will remain readily available to you. For the account holder, this means that he or she will still have access to some funds, which is a good thing as they slowly come to terms and cope with their partner’s death.

Yes, from a couple’s perspective, the joint account is a shared commitment that plays an important part in the relationship. It encourages a sense of responsibility, belonging and involvement in their financial planning. It also helps keep them focused, disciplined and honest when they are making their financial decisions. With all the benefits of a joint account, it’s easy for a couple to think that they absolutely must have one.

However, in the next article we’ll go through the disadvantages of having a joint account and why it might not necessarily be a good thing.

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