Joint bank accounts can be ideal for couples, parents and their teenagers, and adults assisting their aging parents. They function just like personal accounts, such as a current account, but belong to two people, each of who can contribute to and use the money it holds.

On paper, and in an ideal world, joint accounts are great. What could possibly go wrong? Well, a few things.

Parents can monitor a child’s spending habits and can quickly transfer money to a joint account when necessary.
Couples can use cash in a joint account to cover shared expenses such as rent, utilities and food.
Adult children can help aging parents manage their finances.
If a parent dies, an adult child has immediate access to funds in the account, avoiding a potentially lengthy legal process.

Simple bill paying. For couples, a joint savings account simplifies the way you handle joint bills payment and expenses because all money is pooled in one place. You don’t need to divide expenses or decide who will pay for each item in the budget. An alternative is to have a joint account for bill payment with each person maintaining other separate accounts. One drawback to this approach is that money transfer is required to keep the accounts properly funded. Forgetting to transfer money to the joint account could result in an overdraft when bills are paid.


Disadvantages of joint accounts

Here are a few disadvantages of joint accounts:

A child may spend too freely and become overly reliant on mum or dad refilling the account.
Neither partner can control spending from the account, so one could drain it.
One partner could overdraw the account, generating fees that both would have to cover.
If one holder lets debts go unpaid, creditors can pursue money in the account for settlements.
Both holders can see transactions in the account, which can present privacy issues.
Preparing to open a joint account

When to consider it? When there is communication and trust. Whether you’re planning on sharing an account with a child, significant other or aging parent, keep the channels of communication open. That may mean having difficult discussions about spending and savings habits. As uncomfortable as it may be, initiating these types of conversations can prevent even bigger headaches down the road, like those listed above.

“It’s important to lay out expectations with the other account holder,” says Carrie Houchins-Witt, a financial advisor in Coralville, Iowa. “If your teenager hasn’t quite grasped the concepts of saving and spending and personal responsibility, be careful about putting money in the account and expecting them to budget properly without your guidance.”

Opening a joint account

Setting up a joint current account is much like opening a personal one. Here’s what the process will probably look like:

Select the “joint account” option during the application process.
Provide the bank with personal information for all account holders, such as addresses, dates of birth, among others.
If you’re opening a joint account with a significant other, don’t close your personal account, at least not right away. You may want to have money of your own for expenses or for gifts and surprises.