Should Couples Open Joint Savings Accounts?

Among the things that couples disagree or argue about, money is a top subject.

Couples argue about how they should spend money, how they should save it, and how they’ve handled money in the past.

And because things like debt and credit can be difficult to talk about, difficulty talking about finances can fall under the broader couple struggles of communication, openness, and honesty.

Finances rarely come up early on in relationships, and you may be with someone for years before you find out their credit score or how much they’ve saved towards retirement.

Even without full knowledge of your partner’s financial situation, you may find yourself talking about opening up a savings account with them.

A savings account may be a good tool to work towards new financial goals together, and a natural progression as couples grow together, particularly if they cohabitate.

Should You Open a Joint Savings Account?

A joint savings account can be an important first step in starting a partnership.

With a joint savings account, two or more people can access the money in the account.

However, like any financial decision, there are benefits and drawbacks, which must be considered.

The key thing to remember when you open a bank account is that although the account is shared, each person has access to 100% of funds. Most joint accounts have rights of survivorship, which means if you die, the other account holder receives all the money.

Many savings accounts are “free” which creates the illusion that there is no risk, only benefit. But sharing finances with someone is always associated with some risk.

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Evaluate What You’re Saving For

A savings account is a good tool to work towards financial goals – and set aside a little bit of money each month as you work towards a goal.

In a new relationship, a small goal, like a vacation or a joint emergency fund, can be a good way to observe your partner’s discipline and savings habits.

Saving for a wedding

Couples may spend tens of thousands of dollars on a wedding.

For newly engaged couples, or couples planning to get married, a wedding may be the first significant financial undertaking.

Because the wedding is the beginning of a hopefully long and happy future together, it is critical that the financial part of a wedding be discussed and budgeted.

Saving for a vacation

Perhaps you would like to go to Hawaii next year, or New York City. Rather than whip out a credit card to finance your vacation, plan ahead and save for it together.

You can open up a joint savings account, determine how much money you’ll need for airline tickets, hotels, and ground transportation.

Once you come up with an amount, you can each contribute a certain amount each month towards the goal.

Saving for an emergency fund

Many financial advisors will advise that an emergency fund is good to have in place. This could be for the unexpected event of losing your job, your car breaking down, or your pet having a veterinary emergency.

Although 3 or 6 months’ salary is an ideal emergency fund, $1,000 in a savings account is a good way to start and may be a good goal for a first savings account.

Ideal Size of an Emergency Fund

You and your partner can easily accomplish this $1,000 goal, if you each put $167 in an account for three months. If you get paid twice a month, put $83.50 from each paycheck and you’ll crush your goal in no time.

Saving for a home down payment

Coming up with the money for a down payment on a homey may be the most daunting and potentially overwhelming savings goal.

Fortunately, with down payment programs, you should be able to purchase a home with 3% (conventional loan) or 3.5% down (FHA loan).

And working together, you can save twice as fast. If one party to the relationship makes substantially more income than the other, they may contribute more.

Evaluate Whether Your Trust Your Partner

Before you open a joint account and put a significant amount of funds in it, you should ask yourself if you trust the person.

Once you open the account, they will have access to the entire amount of money.

If you break up, or your partner becomes disgruntled with you, there is the possibility that they could withdraw all of the funds in the account and keep them.

They can even close the account without your permission.

Your legal rights to recover money in a joint account would be limited, because of the nature of the joint account – you both had access to the funds.

If there is even a flicker of doubt, do not commingle your funds. There are easy ways to share money without a joint savings account.

Joint Savings for Personal Goals

Before you undertake a noble savings goal, like stashing $500/month into a savings account to save towards a home down payment, it’s important to be honest with yourself about what you need to be doing with your money.

If you are paying high-balance, high-interest credit card payments each month, you would benefit far more from paying an additional $500 in principal on that debt than making minimum payments and putting $500 in savings.

Your credit score will also improve as you pay down balances too.

Although it may be difficult to tell your partner if they truly are on your team and desire the best for you, they will support you, and perhaps even help you.

Benefits of a Joint Savings Account

The benefit of a joint savings account is shared access to funds.

The benefit may be greater for one person than the other, if one person is putting much more funds in the account than the other. If you have a high interest account with an online bank, you may be earning a significant amount of interest.

Another benefit of sharing a savings account is the asset grows quicker.

A savings account does not show up on a credit report, but when you apply for a loan or a line of credit, having a well-funded savings account will help our application when lenders consider your ability to pay.

Probably most important, couples have shared accountability. It helps keep each other in check with their joint goals.

Potential Drawbacks

Risk

The biggest drawback to a joint account is the risk associated with it. If the other person overdraws your savings account, you may not be able to open an individual account in the future, because you will be associated with it.

If one person receives an inheritance or sells a home, they may have a large influx of funds that are put in the account.

If you have a large amount of money in a joint savings account, but the account is mostly funded by one party, it can get complicated if you break up. In the eyes of the law, you both share the funds.

Even worse, the other person could take all the funds away from you.

Hopefully, the other party will do “what’s right” but it is possible that you could be a victim.

This is why it is critical to not open an account with someone you do not 100% trust.

Overdraft protection or debt collection

If you open a joint account and the other person overdrafts their checking account and the joint savings account is linked, your savings account may be depleted to cover their checking account overdraft.

Additionally, if they have accounts in collections, or if they owe money to the IRS, or back child support, your money may be depleted to cover these obligations.

Before you open a shared account, be sure that you won’t be taken advantage of.

Loss of privacy

Another drawback to a shared account is the loss of privacy.

With a shared savings account, you can see everything the other person does, and they can see everything you do.

This may not be as of big deal with a savings account, then with a checking account.

Your partner will not see the $73 you spent with your debit card at Target, but they will be able to see every withdrawal or deposit to your shared savings account.

Consider the Reason for Your Account

If one party to your relationship is putting pressure on the other to open an account, this may be a red flag.

Why is it so important?

Opening an account, for any reason, should be something that is done together with common financial goals.

You should not open a joint account in an attempt to show your partner that you are generous, because you are giving them ample opportunity to take advantage of you.

Otherwise, if there's full trust in each other, a joint savings account can help a couple stay on track financially.