Are you an unmarried couple thinking about managing your finances together? Learn about the pros and cons of using a joint bank account and the best practices for setting it up.

Questions Answered in this Article

1. What is a joint bank account?

• A joint bank account is an account shared by two or more individuals, typically used to simplify shared expenses.

2. What are the benefits of using a joint account?

• Utilizing a joint account can simplify the management of regular expenses and achieve long-term financial objectives, such as saving for a vacation or a wedding.

3. What are the drawbacks of using a joint account?

• The main disadvantage is the difficulty of deciding what to do with the account if the relationship ends, and it can become complicated when shared assets are involved.

4. What is a recommended approach to using a joint account for unmarried couples?

• It is recommended to keep separate personal accounts and create a distinct joint account that both partners contribute to, with clear guidelines about how the funds will be utilized.

5. What are other options besides a joint account for managing shared expenses with a partner?

• Other options include giving money to each other to pay for shared expenses, which may take some additional steps but can help keep funds separate and safeguarded.

Managing Finances as an Unmarried Couple: The Pros and Cons of Joint Bank Accounts

When couples merge their financial resources, it’s usually for the purpose of achieving a common savings objective or contributing to communal expenses, especially those associated with cohabitation. While this has traditionally been a common practice among married couples, more unmarried couples are following suit, as evidenced by the nearly threefold increase in the number of unmarried partners living together from 6 million in 1996 to 17 million in 2017, according to the most recent data available from the U.S. Census. Whether it’s sharing financial goals or living expenses, unmarried couples may have inquiries about how to manage their finances jointly.

One solution to simplify shared expenses is to establish a joint bank account, which can streamline the way you pay for things together. However, if you’re considering opening a joint bank account with your partner, you should carefully evaluate the advantages and disadvantages of this option.

Benefits of Using a Joint Account for Unmarried Couples

Utilizing a joint account can have several advantages, including simplifying the management of regular expenses and achieving long-term financial objectives. For example, you and your partner may desire to pay your rent and utility bills from a single account, or you might want to save for a shared goal, such as a vacation, wedding, or house. Starting a joint account can be a practical step, provided you establish clear guidelines about how much each person will contribute, how the funds will be utilized, and what steps you will take in the event of a relationship breakdown.

Taylor Kovar, a certified financial planner and CEO of TheMoneyCouple.com, suggests that unmarried couples should exercise caution when opening a joint account, as they do not have the same legal protections as married couples who automatically have legal co-ownership of assets obtained after marriage. Instead, Kovar advises keeping separate personal accounts and then creating a distinct joint account that both partners contribute to.

“It’s important to keep meticulous records for the account,” Kovar notes. “Both partners should have access to the account at all times, and you should have a shared understanding of what the account can and cannot be used for. This will help to avoid disagreements and ensure that both partners are clear about how the account is being used.”

Drawbacks of Using a Joint Account for Unmarried Couples

The main disadvantage of utilizing a joint account is the difficulty of deciding what to do with the account if the relationship ends. Separating from a partner can be challenging enough, but it can become even more complicated when shared assets are involved. According to Kovar, the most straightforward approach is to divide the funds equally between both partners. However, if one partner contributed more funds than the other, it may be appropriate to divide the account’s balance proportionately based on the amount each partner contributed.

Financial blogger April Lee, who runs HassleFreeSavings.com, is relieved that she and her former long-term partner did not combine their finances, especially concerning the house that she purchased but where they both resided. After they broke up, he sought legal counsel to sue for ownership, but he could not demonstrate that he had contributed financially to the property.

“He couldn’t provide any evidence that he had contributed to joint assets,” Lee explains. “Having separate finances was a lifesaver for me.”

Best Practices for Setting Up a Joint Account as an Unmarried Couple

If you and your partner decide to establish a joint account, you must first identify accounts that enable co-ownership, and then research their features. Once you have chosen an appropriate account, contact the bank to determine what paperwork and identification are required for both of you to become joint owners.

Additionally, you may wish to inquire whether there is a method for setting a withdrawal limit on the account, such that if one person desires to withdraw more than the predetermined amount, the other partner must also approve the transaction.

After you have established the joint account, it can be utilized for the expenses and goals that you and your partner have previously agreed upon. For example, you may utilize the account for online bill payments for shared costs, such as rent, streaming services, or internet, or you may have outlined how much you will contribute to a beach trip in Hawaii. You can deposit funds into the account until you are ready to book flights and accommodations.

Whether or not to open a joint account with your partner is a personal decision. If you choose not to, other options include giving money to each other to pay for shared expenses. While this arrangement may take some additional steps, it can help to keep your funds separate and safeguarded. However, if you decide to establish a joint bank account, the most crucial step is to ensure that you and your partner have a clear understanding of the arrangement.

Summary

• More unmarried couples are merging their finances to achieve common savings objectives or contribute to communal expenses.
• Utilizing a joint account can simplify the management of regular expenses and achieve long-term financial objectives, such as saving for a vacation or a wedding.
• Unmarried couples should exercise caution when opening a joint account as they do not have the same legal protections as married couples who automatically have legal co-ownership of assets obtained after marriage.
• It is recommended to keep separate personal accounts and create a distinct joint account that both partners contribute to, with clear guidelines about how the funds will be utilized.
• The main disadvantage of utilizing a joint account is the difficulty of deciding what to do with the account if the relationship ends, and it can become complicated when shared assets are involved.
• Other options besides a joint account for managing shared expenses with a partner include giving money to each other to pay for shared expenses, which may take some additional steps but can help keep funds separate and safeguarded.
• If you choose to establish a joint bank account, the most crucial step is to ensure that you and your partner have a clear understanding of the arrangement.