Joint Bank Accounts: How and When They Work
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Joint bank accounts belong to multiple people, each of whom can contribute to and use the money in the account. Such accounts can be a good fit for couples, adults assisting their aging parents and parents who are teaching their kids about money management.
On paper — and in an ideal world — joint accounts provide easy collaboration for spending and saving. But realistically, they require more self-awareness and trust than the typical bank account.
Here's a closer look at what to consider before opening a joint account.
» Skip ahead to compare some solid checking accounts.
Is a joint bank account a good idea?
A joint bank account can be a good idea as long as you and the other account holder have a strong, trusting relationship. Whether you’re planning to share an account with a child, significant other or aging parent, communication is essential. That may mean having difficult discussions about spending and saving habits. As uncomfortable as it may be, initiating these types of conversations can prevent even bigger headaches later.
»Unmarried? Consider whether you and your partner should open a joint bank account
“It’s important to lay out expectations with the other account holder,” says Carrie Houchins-Witt, a financial advisor. “If your teenager hasn’t quite grasped the concepts of saving and spending and personal responsibility, be careful about putting money in the account and expecting them to budget properly without your guidance.”
Pros of joint bank accounts
Parents can monitor a child’s spending habits and can quickly transfer money to a joint account when necessary.
Couples can use cash in a joint account to cover shared expenses such as rent, utilities and food, as well as shared savings goals, such as setting aside money for a vacation.
Adult children can help aging parents manage their finances.
A joint account can be set up so that if a parent dies, an adult child has immediate access to funds in the account, avoiding a potentially lengthy legal process.
Each account holder is federally insured up to $250,000 at a bank or credit union. (Joint accounts and individual accounts are considered different ownership categories, so a person can be insured for up to that amount in a joint account and separately for up to that amount in an individual account.)
Cons of joint bank accounts
A child may spend too freely and become overly reliant on mom or dad refilling the account.
Co-owners on the account are both responsible for fees, such as overdraft charges.
If one holder lets debts go unpaid, creditors can go after money in the joint account.
Both holders can see transactions in the account, which can present privacy issues.
» Looking for savings options? See NerdWallet's best savings accounts
How to open a joint account
Setting up a joint bank account is much like opening a personal one. Here's what the process will probably look like:
Select the "joint account" option during the application process with your bank.
Provide the bank or credit union with personal information for all account holders, such as addresses, dates of birth and Social Security numbers.
If you’re opening a joint account with a significant other, you don't necessarily need to close your individual account. You may want to have money of your own for personal expenses or for gifts and surprises.
Alternatives to joint accounts for teens
If you have a teenager, you might also consider opening a teen checking account. These accounts can have lower fees and may place daily restrictions on how much cash your child can withdraw from an ATM. However, if your bank or credit union doesn’t offer teen accounts, you may need to open an account at a different financial institution, which could make it more difficult to transfer money easily. See our picks for top checking accounts for teens.