Yours, Mine, and Ours: What to Know about Joint Accounts

For many long-term relationships and marriages, the question of merging finances is an inevitable conversation. Once a significant portion of spending becomes joint spending, managing finances can become complicated. 

What is the best approach to handling shared expenses? Does it make sense to share accounts, or is it prudent to maintain separate accounts? How do we collaborate on shared goals? How do I consider my individual financial goals in this equation?

It’s common to hear this discussion boiled down to an all-or-nothing scenario between combining finances or not. The answer for most, however, lies somewhere in the middle. There are benefits to both joint and individual accounts. Couples can consider a combination of accounts to suit their unique needs and vision for life. Whether a partnership looks like young newlyweds or new phases in life, the possibilities are customizable for good reason. 

Ownership and Accessibility: The Basics of Joint Accounts

Joint accounts allow for two or more owners, but not all ownerships work the same depending on the way accounts are established. In one type of joint account, each party has equal control over all assets. This means that in an account with two joint owners, each is not limited to 50% control, but has full access to 100% of the assets owned. Either owner can deposit or withdraw funds at any time, in any amount. 

While we typically think of this as the standard in joint accounts, there are different types that provide a variety of options for ownership and transfer in the event of death. Starry Financial Group answers these types of questions for our clients all the time. We find ourselves regularly partnering with couples, families, and all different walks of life to ensure accounts are properly titled for individualized life goals. 

Ease and Knowledge-Sharing: The Benefits of Joint Accounts

What are some possible uses for joint accounts? Joint accounts are a convenient way to streamline the management of shared expenses like rent, mortgages, utilities, and groceries. Both partners can deposit funds at regular intervals and make payments from the same account. For many couples, this helps streamline money transfers or the use of apps like Venmo, which can include fees. Not only can joint accounts make it easier to keep track of bills, but account statements generate a detailed history of shared spending, a helpful tool when creating or assessing budgets for some. Isolating this information from individual spending can be insightful when it comes to discussing finances as a household. 

Joint accounts are also a great way to save for significant shared goals like vacations, down payments, or home projects both parties are invested in. The ease of access for anyone involved makes it easier to track progress and share an understanding of where you’re at. Working together in this way can be a bonding experience in some relationships and increase both parties’ knowledge of their spending and saving habits in the context of shared goals.

Often couples consider joint accounts to be a good option for emergency funds. In the face of unexpected circumstances, such as health complications, family emergencies, or unforeseen expenses, either owner can access the designated percentage of funds if the other is unable to act on their own. This leaves emergency savings readily available in more circumstances than separate accounts alone and increases couples’ ability to support each other or help in times of need. 

Protection and Privacy: The Possible Drawbacks of Joint Accounts

The fundamental accessibility of joint accounts by their owners can create drawbacks for some partnerships. Accessibility and trust go hand-in-hand. Owners are financially bonded to some extent, having given the other access to their savings and investments. There is the potential for negative financial and emotional effects if one or both owners have a history of misunderstanding the uses of shared funds or difficulty collaborating as a team in both saving and spending. In more severe cases, shared liability can be considered a concern, as creditors can pursue joint accounts to settle the debts of any one owner. 

Privacy is worth reflecting on as one or more parties consider the use of joint accounts. Transactions associated with a joint account are available to any other owners. All relationships are different, and if partners need or prefer some degree of separation in spending, for any reason, they won’t get it without maintaining an individual account. Consider even instances of birthday or holiday gifts for partners and family members. Joint accounts increase transparency in spending, but could disrupt even pleasant surprises for couples by accident! 

It’s unavoidable, the more merged a couple’s finances are, the more complicated the potential end of a relationship can be. If someone is unsure how their partner will act in the event of a separation or divorce, merging finances to a significant extent or eliminating individual accounts in favor of joint accounts from their overall financial equation could result in discomfort or confusion. Planning a couple’s use or disregard of joint accounts can help to structure a financial relationship to avoid the potential for one partner to be disadvantaged should the need to separate finances arise. 

A Balancing Act: Considering Benefits and Drawbacks to Envision Your Financial Future

There are many reasons for couples to consider the use of joint accounts, as well as maintaining individual accounts over their lifetime to achieve their financial goals. When creating or reviewing financial plans, it can be helpful to revisit these questions. Less than half of couples completely merge their finances in their lifetime, and don’t forget – retirement accounts and savings cannot be placed under joint ownership! 

The key to a harmonious financial plan is ultimately a conversation with your partner and financial planner, as well as an understanding of each partner’s objectives, regardless of the account types involved in the final conclusions. How to manage finances together is not a question with a universally decisive solution because each person and relationship is unique. No two couples have the same philosophy or dreams behind their financial goals. A strong financial foundation lies in open communication, mutual respect, and professional financial advice when helpful or necessary. Individual and joint goals in a financial relationship, and the accounts that follow, are established to ensure those goals are attainable. 

Finances are a tough topic in many partnerships, but with greater understanding of the functions of account options available, individuals can gain confidence in the decisions they make with their significant others and financial planners. A balanced plan that is comfortable for all parties involved has the capacity to bring everyone closer, not just to their goals but to each other. 

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Starry Financial Group and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. 

Investment advisory services offered through Raymond James Financial Services Advisors, Inc.. Starry Financial Group is not a registered broker/dealer and is independent of Raymond James Financial Services. Securities offered through Raymond James Financial Services, Inc., member FINRA / SIPC.