Are joint accounts the right fit for your relationship and when should you start one?

By Isla Leask Associate Financial Planner at Financial Planner from Acumen Financial Planning

With 32% of couples in the UK sharing their income through joint accounts and a further 91% of joint account holders having marital status, it’s clear many people see this route as the way forward. But are they the right fit for your relationship and personal circumstances? And if so, when should you open one?

45% of people in the UK have said they feel less stressed about money after sharing their finances with their partner. Understandably, couples who live together or who have recently married may opt for a joint account to make bills and expenses a smoother transaction for both parties and make day to day expenses easier. 

But it can be tricky to know when the best time is to get the ball rolling, and if it is even the right option for you.

When to open a joint account 

A lot of people may feel they have to wait until they are married or living together to open a joint account and will possibly hold off until they have. However, this will of course depend on the couple’s circumstances and if they both mutually agree to open a joint bank account. 

There are several reasons to open a joint account when in a relationship regardless of whether you have a certificate to prove the union yet or not. What remains important in each situation is to have an open discussion with your partner on this and work out if this is the best move for you both. 

Pros and Cons

There are many benefits to having a joint account, such as making managing transactions and bills equal and easier, both parties can withdraw money whenever they wish, and they can make budgeting easier.  Most commonly this account is used for bills, with each individual transferring the required bill amount to the joint account from their own personal current account.

In addition, this account can allow you both to save towards a joint expense such as a holiday, property deposit or a wedding perhaps before you are living together. It also allows a level of trust within a relationship and provides each party with an understanding of how good you both are with money, providing an insight for the future. Some online banks also allow the facility of providing a text to say when money is spent from the account which can help with budgeting and being accountable for any unnecessary spending.

However, whilst there are many benefits to having a joint account there are some factors which couples need to take into consideration. When opening the account, it is important, as obvious as it sounds, to consider that once you get one, you will become financially linked to each other. For example, if your partner has poor credit and debt, this will also show on your credit report. It is important to be aware of this, particularly when you consider that 46% of those who have all their money in joint accounts don’t know their partner’s credit score, not even approximately.

A joint account should only be considered with a trusted partner as you have no rights if the other person spends all the money, if there were any hesitations, it is not recommended to open an account. Joint commitments can still be shared with separate accounts, it just involves transferring your share to someone, or the other way round in order to pay bills.

It is important to have these open conversations with each other prior to opening a joint account so that both people are clear on each other’s financial situations, and how this could affect the other. It’s possible that you each arrange a credit rating which are available from online companies for example Experian.com which you can obtain a free trial from and share with each other before committing to a shared account. 

Similarly, if the relationship breaks down, both individuals depending on the bank may have to sign an agreement before the account can be closed which could leave either person financially vulnerable if the other does not agree to this. It is possible to freeze the account by asking your bank to cancel the mandate, which will mean that neither party can access the funds and will only be unlocked when both parties agreed to how the funds will be split. If a decision can’t be made it’s possible that the courts will need to be involved. 

Lastly, any overdraft that has not been paid off, will have to be paid before the account can be closed. It’s important to remember that by just closing the account, it won’t remove your financial link to the other person from your credit file. If all financial connections to the other party are closed (including loans, mortgages, and credit cards) it’s possible to ask credit reference agencies to issue a ‘notice of dissociation’. This should stop any future credit applications by the other party affecting yours going forward. 

Where are joint accounts heading?

There will always be a need for joint accounts and many people may still opt for this type of account when newly married or when they initially move in together for example.  However, we are also likely to see a rise in financial independence. 

Many of those who were financially independent before getting married or into a relationship where living together is likely, may not want to let go of this independence. 

We would never recommend only owning a joint account with someone, as it’s important to retain some of your own money for sole expenses or rainy-day funds whilst retaining part of your financial independence.

Whilst joint accounts work for some people, they do not work for all, which is fine. However, many younger couples may feel they want to control their own finances, regardless of if they are married or in a relationship and continue to split costs where necessary. 

It is also possible if one party has significantly higher funds than the other that a solicitor can help to draw up a pre/post nuptial or cohabitation agreement. Each are legally binding agreements between two individuals who are either about to get married, are already married or are living together without planning to tie the knot.

Top tips from Acumen Financial Planning

Here are our top tips for those considering a joint account:

• Talk about finances with your partner and decide what is best for your situation. 

It’s important to understand each other’s finances as each may have different incomes and respect the other person’s personal costs. It is also essential to be transparent with each other on any outstanding debt that each person may have. 

•  Agree on the amount you would like to put into the joint account. 

When considering opening a joint account, couples should mutually agree on how much they would like to put in. For example, one person may not want to put their full monthly wage into the joint account but would be happy to put their total monthly bill amount. 

• Agree on where to put the money and the type of account that is suitable for you. 

Banks offer different interest rates and services, many now also incur monthly charges, therefore, it is important shop around to find the right account suitable for both.

• Create a contract for future scenarios.

To help couples feel more secure, they could draft a contract that both parties sign which will have agreements on what happens if the relationship breaks down. This will detail how both will combat the costs after they split. For example, if there is an overdraft on the joint account, there may be a mutual agreement on how to pay it back. 

• If possible, consult with your Financial Planner.

If you are unsure on your finances, your financial planner will be able to advise you and provide you with the best solutions.