Questions to ask before setting up a joint account
Setting up a joint account can be a helpful way to manage money with a partner, roommate or anyone you might share bills and financial responsibilities with. It’s best to have all the information about how joint accounts work before beginning.
Equally as important is knowing all about your partner’s finances too so having a joint account never becomes a burden.
Make sure you have a mature conversation where you ask all the important questions.
What is the purpose of the account?
To begin, set a specific goal of why you need the account. Is it for a specific item like a new shared car, to pay shared rent and house bills or is it simply an emergency savings pot?
This can help you determine a time frame if necessary as well as how much is needed each month and so a budget can be created for both account holders.
What is your income and what are your regular outgoings?
It’s best to be honest from the start so that the joint account doesn’t become an extra financial strain.
Knowing both account holders income will help you with the rest of the conversation as the budget has to be realistic for both.
Make a list of any regular outgoings that you both have including subscriptions, gym memberships, phones bills and anything else. This will help you determine what is leftover and how this can be split into the savings pot.
What will our budget be and how much will we transfer into the account?
Creating a budget of how money will be placed into the joint account each month will help you keep the account fair.
For every joint account the dynamics could work differently, you could both pay the same amount each month into the account, one might pay in more than the other, you may only want to transfer small amounts every so often, it will completely depend on your personal situation and relationship.
What is the plan if the account goes into an overdraft?
It’s always best to be prepared for occasions like this so you know what to do when it happens and reduce the pressure.
You could decide to both pay in to the account or just one of you to clear the overdraft. Making sure there is a plan to pay the overdraft will help to have a quick fix and avoid any interest adding up.
Do you have any debt?
If one person has debt and a low credit score then this could affect the other and might be worth considering fixing the debt before having a joint account.
You don’t want someone else’s debt reflecting onto you and this could damage your mortgage prospects later on too.
Will you also maintain personal savings pot too?
If this is a joint account with a partner you may be thinking of the account as a general savings account for you both. However, it is recommend to also have a personal savings account or simply a personal bank account per person as well. This is to encourage financial freedom and will help you keep the joint account separate and distinct for its main purpose.
Both account holders have access to the full amount in the joint account and this can often lead to hostile situations. Even if you are setting up a joint account with someone you trust, it is still a good idea to keep your own account too.
