It’s essential to know the obligations associated with having a shared account before you open one.
Are you thinking about opening a joint bank account? Commonly used between people who want to share access to money spent on mutual expenses like rent, bill payments, mortgages, etc., the features of a joint bank account are relatively straightforward: all members on the account can withdraw, deposit and make payments without the consent of other accountholders. However, if not used responsibly by each party, there could be serious financial consequences.
Before you agree to open a joint bank account, you must ask yourself these 3 questions:
1) Do you fully understand the obligations of a shared account?
It’s essential to know the obligations associated with having a shared account before you open one. Once money is deposited into the account, each person has equal share of all funds. If the account becomes overdrawn, both individuals are responsible for the money owed. If your co-accountholder makes a financial mistake and ends up in debt, it’s your debt too.
When it comes to the funds available, opening a joint account means that the same rights apply to each person. Additionally, your co-accountholder can see the transactions that you use, and vice-versa. Recognizing the obligations that you have in maintaining a joint account is a crucial step in ensuring that your money stays safe and is being used sensibly.
2) Do you know the risks associated with joint accounts?
In the eyes of the law, each person is an equal holder of a shared bank account, so before you open one, there are multiple factors to consider.
Account holders can do transactions without first obtaining the other account holders permission, and any mishaps on a shared account (overdraft charges, debt collection, liens, etc.) will affect everyone. If you’re hesitant about the idea of someone else using your money without your consent, you might want to consider another option.
3) Do you trust the person who will be the co-accountholder?
If you’re interested in opening an account with another person, your priority is to ask yourself: how much do I trust him/her? If they’re likely to act in your interest and can maintain money responsibly, you’ll be less likely to encounter the risks associated with opening a joint bank account. However, if the account is managed irresponsibly, there are financial and emotional dangers that could put you in harm’s way.
It’s essential that the line of communication between all accountholders is kept open and honest to reap the benefits of a shared account. Before opening, ensure that yourself and the co-accountholders see eye-to-eye on all terms and agreement, and if you’re confused about the overall process, be sure to speak with someone from a financial institution to better understand how to effectively manage your money in a shared account.