Opening a joint bank account: The pros and cons.
Written by Payplan Ryan on 29 April 2013f you’re in a serious relationship in which food, bills, utilities and other expenses are paid for together, you may be tempted to open up a joint bank account. However, you may be unsure whether it is the right move. Here we look into the possible impacts of a joint account. Statistics from the Norwich & Peterborough building society (N&P) in 2011, suggest that six out of 10 Britons would open a joint account with their partner despite concerns such as the desire to protect their own wealth and fear of their partner’s judgement about the amount they spend. The pros and cons to joint accounts must be weighed up against each other before you commit your money and savings to an account that is not solely in your name.
The prosIn most cases, household bills, including food bills, can be easier to manage from just one account. If a couple are committing an agreed amount into the account, it shares the load of bills and can be managed easier; keeping track of the payment of bills can be far simpler. The biggest advantage, however, is the increased amount of savings which can be made. With two incomes, it’s a case of ‘many hands make light work’, your savings will increase much more quickly than when you are saving alone. So if you’re looking to go on holiday or make some changes to your home, this can be a great way to motivate one another and ensure that you are both saving as much as possible.
The consYour frame of mind and level of trust will determine how much of a negative point sharing your money with someone else is. It goes without saying that you should only enter a joint account, where your partner has access to your money, if you trust them completely. You become more reliant upon your partner’s honesty not to leave you out of pocket. You could also find out that your partner is not as reliable with money as you thought. A tempting purchase and large savings in the bank could be too difficult to ignore, so you must ensure that you both understand what the money is for. Perhaps the most important point is the fact that a joint account won’t allow you to take advantage of the £5,760 cash saving tax-free allowance that every UK taxpayer is entitled to (for the 2013/14 tax year you can pay a maximum of £11,520 into ISAs, of which £5,760 can be saved as cash). If you have savings below this level, an ISA might well be the best option for you, but you should always discuss your options with a financial advisor before you commit to either option.
Is it right for you?Like anything in life, joint accounts have their advantages and disadvantages. If you are in a trusting long-term relationship and looking to purchase something together – whether it’s a trip abroad or a new kitchen – a joint bank account can work incredibly well. Another consideration is that of ‘Joint and Several Liability’. If, for some reason you face certain financial difficulties, both parties are responsible for the account: even if one party is to blame, both will be accountable and face the consequences. Once you have made your decision, don’t be afraid to constantly review it. Naturally sometimes things don’t always work out and should the worst happen and your relationship breaks down, be sure you can safely and securely move on with your finances intact.
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