How to manage money jointly
How to manage money jointly
A joint account can be useful, especially when you live with someone else and have joint responsibilities. However, it is even more useful to understand how to make the most of the account and to manage the money so that it can work for both of you.
Are joint accounts a good idea?
A joint account can be a good idea for a number of reasons. They are particularly useful for those who live with others and for those in a relationship with joint responsibilities.
A number of uses of a joint account include:
- Paying for joint bills, including rent and utility bills
- Paying for trips with a partner, including meals out and holidays
- Paying for essentials for your children with your partner, including school uniforms and trips
However, it is also worth considering the downside of having a joint account. Once you open a joint account, your credit history is then linked to theirs. This means if they have bad credit, this can affect your score too. You will also need to trust the person when looking at how to start a joint account, as they will have access to the money that you deposit.
How to better manage money together
When opening a joint account, there are a few things you can do to make the most of the account and to manage money as a couple.
Be open about your credit history and any debts
Since both your credit ratings will be affected by each other, it is important to be honest about your credit history and any debts that you have had or still have. This will make you both aware of any consequences of linking yourselves financially.
It is also important to be open about what you expect from one another and any concerns you have about your finances so you can support one another.
Make sure it is equal
It is important to come to a mutual understanding of how much will be put into the account each month. Although an equal amount won’t work in all situations, it’s an ideal start to make sure the amount is equal and fair when looking at how to start a joint account.
Create a shared savings goal
If your aim is to save for something particular, whether that’s upgrading your home with a new kitchen, or going on holiday, having a shared saving goal can be useful. This will help you manage how much should be put in each month.
Consider a separate bank account
Although a joint account can have its perks, it can also be beneficial to still have your own separate account too. That way, your joint account can be kept for joint bills and savings, and your own current account can be used for your personal spends.
Track your joint budget
If your joint account is for more than bills, it can be a good idea to set a limit on how much you can spend from it. Anything that exceeds this limit should be a joint decision. This is a good way to keep an eye on your account, so you will always be aware of how much is in it and how much you can afford to spend. This can also help you manage your savings goal, particularly if you are using the account to save.
Share financial responsibilities
Couples tend to have shared responsibilities. For example, bills, rent, mortgage, and other household costs. There are many ways you can tackle this, including opening a joint account, split who is paying for what, or the main wage earner pays the bills.
Either way, it is important that both parties understand the finances and what responsibilities they have so that everyone is aware of how their money is being spent. It is also important for both parties to understand how to use a joint account if that is the option you choose.
How to avoid joint debt
The main risk of opening a joint account is joint debt. If you take out any loans with the account or end up in the overdraft, then you are both liable to pay. If your partner doesn’t pay their share, you are still liable regardless. Therefore, don’t agree to any joint debts unless you are completely happy to do so and trust that your partner will pay their share.
Some ways to avoid joint debt are:
- Keep a separate credit card for your own use
- Monitor your partner’s credit history
- Avoid joint bills and loans if your partner has bad credit
If you’re wondering whether this is the right option for you, you can check out our guide on whether you should open a joint account.