Personal finance expert
Martin Lewis has targeted couples who have a joint bank account with his latest advice – and said ‘make sure you both take decisions’. The personal finance expert asked if listeners to his podcast put all their finances together – and warned that if the did so it was a bad idea to have just one p person making all the decisions – and using the accounts to make changes.
And he said the couples should make plans to share the key information. He said: “How do you work your finances together if you’re in a couple? Is there a family financial controller who does everything and leaves the other person off? If so, while it feels generous, it can be a problem. Now, couples work their finances in all different types of ways. Some, especially older couples, have just one joint bank account that everything goes in. Many younger couples have a bank account each separately and then a joint account for bills. That’s less relevant than is one person making all the decisions, got it all stored in their head.”
Mr Lewis said the reasons was ‘not nice.’ He explained: “This is a problem, and I’m Sorry, it doesn’t sound that nice. Are the three Ds: death, divorce, and dementia. And because of the chance of that happening, you need to make sure that the other person, the one who doesn’t do the finances, is tooled up so they could take over if needed.”
The answer is to make sure that both parties are fully up to speed. He said: ”My first suggestion would be make sure you’ve got a financial fact sheet, a nice long list of all the different financial products and others, gas and electricity provider, breakdown provider, and more on one piece of paper or stored somewhere safe online that you can both access. Just make sure you don’t put anything in it that would be insecure if somebody else got it so they have somewhere to start. And then every two or three months or so have a family kitchen table financial meeting where the financial controller can explain to the other person what you’re doing. You can share the decisions and tool each other up to be able to take over if horribly you have to do it by yourself.”
To listen to the full podcast click here.
Matthew Parden, CEO of the money management app Marygold & Co, has explained what a joint account is and outlined its key benefits and drawbacks.
What is a joint account?
“A joint account is a current account and unlike a sole account, which is in your name only, there are at least two parties attached to that account,” says Parden. “Joint accounts are usually set up by cohabiting couples who have commingled finances and require an account to receive contributions or income from both parties.
“They are usually used to pay bills and for general household spending.”
What are the benefits of setting up a joint account?
“The main benefit of a joint account is that it enables people to commingle their finances and have transparency around the contributions and income going in and the bills and expenses going out,” highlights Parden. “The transparency of this can help people manage their money more effectively.”
Joint accounts can also be very helpful for mortgages, for example. “Rather than paying from two individual sole accounts, mortgage payments can come out of a joint account,” says Parden. “So, there’s obviously contractual reasons why there may be a joint account, which then has a consequential benefit of being used for joint finance generally.”
Are there any risks in opening a joint account?
“Some people don’t realise that there is a financial link between the parties to a joint account that can affect credit files,” highlights Parden. “So, if there’s an overdraft in that joint account, or the account exceeds the overdraft that’s in place, that can impact both people’s credit files, credit records and credit scores.”
In addition, having a joint account could put your money at risk if the other person makes unauthorised withdrawals or incurs debt. “If there’s a lot of money in there, it legally belongs to both those people, so someone could empty it,” says Parden. “For example, if your relationship goes sour, someone could in theory take all the money out and it might be difficult to get back.”
If you want to suspend your joint account, the first port of call should be the bank that holds the account.
“You would have to get in touch with the bank and notify the bank of the fact that there’s no financial connection anymore, and the desire to freeze that,” says Parden. “But it’s quite possible that, if there was a breakdown, that the money could have gone already.”
What important discussions should you have before opening a joint account?
Firstly, assess why you need one. “Ask yourself why you need one,” advises Parden. “You should both have an understanding and agreement of what exactly the joint account is for. It could be that you need to commingle finances and have two incomes going in there and costs going out.”
The next important step is to set out clear expectations.
“Talk about what each party’s expectations are for those contributions to the account,” recommends Parden. “Are you going in 50/50, 75/25 or 100/0? It’s really good to have an understanding of what is actually going in and what’s going out.”
Having regular check-ins about this can be a great way to feel more in control and less overwhelmed about your finances.
“Do keep an eye on what’s happening with the balance and do check-ins on a regular basis to make sure the contributions are sufficient and to see if you need to adjust the amount of money going in,” says Parden. “It’s very easy towards the end of month for a balance to risk of slipping into overdraft, and you want to be told and understand that well before it happens, so you can actually remedy it.”
What options do you have to assess when first opening a joint account?
“You might want online banking options or want an account that is associated with sole accounts you already have,” says Parden. “The ability to use these accounts on apps can also be really useful as they can clearly display shared finances and can help you with budgeting and reviewing your holistic spending.
“Interest rates probably won’t be driving this decision as most current accounts have low interest rates.”
