One of the least talked about yet most impactful decisions a married or soon-to-be-married couple can make is whether to open a joint checking account. Depending on your family’s traditions, it may be common for a married couple to open a joint bank account as soon as the marriage license is signed, if not sooner. For others, traditions may say that accounts stay separate to keep a level of autonomy between the couples.
Regardless of the outcome, this discussion must occur. To provide you with the tools to talk about merging finances with your spouse, we’ve listed five key tips that can help you make this decision together.
Discuss the Benefits
When it comes to opening joint banking accounts, there are generally three main advantages:
- Fostering trust
- Providing financial transparency
- Easier planning of expenses
All relationships are built on a foundation of trust. A joint checking account requires trust, as the money put into the account rightfully belongs to both joint account owners, meaning the quarterly bonus you worked hard for can be easily withdrawn by the other person for their own needs. So, just as marriage shows your trust in your spouse, so does a joint checking account.
Beyond showing trust, a joint account also helps provide a layer of transparency, something separate bank accounts cannot. With shared responsibility for the same account, each partner can keep track of how much money is coming in and how much is going out. This makes it easier to budget and know when a date night needs to become a stay-at-home night.
Since the transparency of a joint account makes it easier to budget, it also means it’s easier for the couple to plan and pay for upcoming expenses, such as monthly bills, medical expenses, or large purchases. As each person within the marriage has equal access to the funds in the account, a joint account also aids in situations where one spouse needs to make a payment while the other is incapacitated.
Discuss the Disadvantages
As with all things, where there are advantages, there are also disadvantages. When it comes to joint banking, these disadvantages need to be discussed, as well:
- Lack of autonomy
- Justifying spending habits
- Increased odds of worse case financial scenarios
The first disadvantage should be easy to understand. With combined accounts, neither individual within a marriage can act autonomously with their money. That is, almost every financial decision must be a joint one as the money belongs to neither individual exclusively. If the marriage is occurring after both people have proven financial habits and individual assets, this change can be jarring.
With the lack of autonomy comes the added stress of continually discussing money. Should you have a habit of making online purchases late at night or spending big on the latest technology, you’ll likely find yourself having detailed discussions about the difference between wanting something and needing something.
People rarely get married with a plan for how the divorce will go, too. However, not all marriages end up happily ever after, and a joint account makes it easier for either spouse to empty it should things turn ugly. Even if divorce isn’t in the picture, if there’s a disparity in income levels between the spouses, one spouse may find themselves more inclined to spend money they didn’t earn.
Be Transparent About Debt
As part of your financial discussion with your spouse, you’ll both need to be clear and transparent about your credit histories. This may mean discussing any large debts either of you have incurred, such as student loans, medical bills, or credit card debt. It may also be a good idea to look at each other’s credit score and report. This can supply an accurate picture of the information that can affect both of you down the road, such as whether you’ll be able to get a new car, a mortgage, or how much debt one spouse will be responsible for should the other default.
If one spouse has a lower credit score than the other, it may help the less-highly scored spouse to have their name added to the other’s credit card. This may help boost their credit score, although it usually will also give them the ability to rack up added debt and potentially lower the other’s score if the debt goes unpaid.
Create a Game Plan
Every person budgets differently. Some people may even lack a written budget and only keep a mental tally about how much they can spend from their last paycheck. Still, others may not pay attention to their finances at all.
No matter what type of budget you may keep as an individual, spouses should work together to come up with a budget that works for everyone. Each member of the marriage should have insight into how much money is coming in and how much is going out. This will help gain traction on your financial goals, whether it’s increasing savings, reducing debt, or building a more comfortable nest egg.
Discussing finances this granularly can invoke some anxiety. But, by working together to come up with a financial game plan, you can ease stress down the road, and better prepare yourself for life’s hurdles.
Go Slowly and Steadily
For those who’ve read the advantages and disadvantages of joint bank accounts and weigh them equally, it should be noted that intermingling finances do not have to fall to either extreme of having only joint accounts or rejecting them entirely. That is, it is possible to have both joint and separate bank accounts in marriage.
By opening a joint account while still keeping individual accounts, you can work slowly and steadily towards both the collective and individual goals of a married couple. If things go well with the joint account, you can eventually open up others and apply for joint credit accounts, too.
On the other hand, the first joint account can provide you with real-world spending scenarios that the other didn’t provide during your discussions. This can help you find where a combined budget is more wishful thinking than practical accounting. Either way, the joint account can give you further insights into the other’s spending and saving habits.
Open an Account Together
So, you’ve talked about the advantages and disadvantages of a joint account, you were transparent about each of your debt situations, and created a budget. What now?
Once you’ve discussed the above points with your partner, it’s time to actually open the joint bank account together and start co-mingling your finances. At Blackhawk Bank, you can open your account online in minutes or at one of our convenient locations if you want to work with one of our knowledgeable and customer-focused bankers.
Make sure to reach out today if you need help opening a new joint account.
We can be contacted by phone at 866-771-8924 or by filling out a form on our contact us page.