Pros and cons of joint bank accounts for every stage of life

Thinking about opening a joint bank account? Whether it's with your spouse of 30 years, a business partner or an adult child, it requires careful consideration.

A joint account is simply a bank account shared by two or more people, each with full access to the funds. Having a joint account can make it easier to manage shared expenses, but it's not always the best choice for everyone.

A recent study from Fidelity found that only about half of couples say they make financial decisions together. This shows that even people who are close don't always see eye-to-eye on money matters.

Before you merge finances with a loved one, consider these pros and cons of joint bank accounts, and whether they’re the right move for you.

Benefits of a joint bank account

Joint bank accounts can be a powerful tool for anyone looking to streamline their financial lives and work together toward common goals. Here are some of the many benefits: 

Dig deeper: What not to do after losing a spouse or partner: A financial checklist

We asked a CFP: Why would someone want a joint bank account?

I've been a financial planner for 25 years and the best example of how a joint account has helped many of my clients during this time is when one of the spouses passes away or becomes incapacitated.

Regardless of which spouse ‘takes care of the bills,’ if the other spouse does not have control or access to the funds when or if something happens, it is much harder to pay for medical bills or just everyday bills as well.

In my opinion, there is nothing wrong with a joint account between spouses as long as no issues exist with regard to spending habits between the two individuals.
— John Foard
Certified Financial Planner
CCO and Cofounder of Charlotte-based Crown Advisors, LLC

Drawbacks of a joint bank account

Downsides come down to potential strain if spending, saving and lifestyle habits don’t align, including:

Who can open a joint bank account?

Joint bank accounts aren't just for married couples. Any two people who trust each other to share money can open one, including:

We asked a CFP: Should I add my adult child to my bank account?

John Foard has been a financial advisor for over 25 years and says there's one common instance where he usually recommends against a joint account: when it's with an adult child.

Some older retired clients want to add their adult children to their bank accounts just in case something happens to them. Almost 100% of the time it is due to wanting to have an adult child be able to pay bills for them in the unfortunate event they become ill, incapacitated or even pass away.

This is the exact opposite of what you should do. I inform my clients that all they need to do to accomplish this goal is create a power of attorney giving their adult child the authority to write checks on their behalf to satisfy any financial obligations that are needed.

And if death is a main concern as well, I inform them to add a transfer on death (TOD) beneficiary designation to their accounts, which allows the money to pass along to their desired beneficiary without passing through probate. This is a big one for our clients, as we give this council very regularly.

Additionally, if you are a non-spouse, joint owner with someone else's account and that person gets sued for any reason at all, you are now potentially a defendant in that lawsuit if they decide to come after the funds in that account. Best-case scenario is you will only need to pay an attorney to defend yourself against the claim, but it is still an undesirable scenario regardless.
— John Foard
Certified Financial Planner
CCO and Cofounder of Charlotte-based Crown Advisors, LLC

Joint vs. separate: Can both be the best way to bank?

Many couples find that a blend of joint and separate accounts offers the best of both worlds. This “yours, mine, and ours” approach creates a sense of financial harmony while maintaining your individual autonomy, especially if you have different spending habits or goals.

You could do this one of two ways: 

This blended approach can work well for many relationships.

The key is open communication and agreement on how to manage shared and individual finances. If done right, the blended strategy has many benefits:

Is it wrong to have separate bank accounts as a couple? 

No, it's not wrong to have separate bank accounts as a married or partnered couple. Many couples successfully manage their finances this way. What matters most is that both partners agree on the arrangement and communicate openly about money. Some couples find a mix of joint and separate accounts works best because you can share expenses and still maintain some financial freedom.

Dig deeper: 5 popular budgeting strategies — and how to find the best fit for how you save

How to open a joint bank account

If you feel comfortable opening a joint bank account with someone, here's how to proceed:

⚠️ What to know: It’s more than a name change

A true joint account requires both parties to apply together. Simply changing the name of your account from “John Doe” to “John and Jane Doe” doesn't create a joint account and won't increase your deposit insurance or grant account rights. 

Dig deeper: How to find and open a high-yield savings account

How to close a joint bank account

Closing a joint account can be tricky, especially if your relationship has soured. Here's how to handle it:

How do taxes work on a joint account?

Any interest you earn on a joint account is generally taxable, and the IRS will require you to report it as income on your return. But how you do this depends on your filing status.

You only pay taxes on the interest earned, not on the money you put into the account. Talk to a tax professional or accountant if you’re unsure how to handle taxes. 

Joint account holders vs. beneficiaries: What’s the difference?

Joint account holders and beneficiaries have very different rights when it comes to your bank account. 

Joint account holders are people who share equal ownership of an account. For example, you and your spouse might be joint holders of your checking account. Both of you can:

If one joint holder passes away, the surviving holder typically gains full ownership of the account.

Beneficiaries are individuals you designate to receive the funds in your account after you pass away. For instance, you might name your adult children as beneficiaries on your savings account. 

Beneficiaries:

Related reading: What happens to your bank account after you die?

FAQ: Banking, your balance and managing your money

Have lingering questions about the pros and cons of joint bank accounts? Explore these frequently asked questions.

Does gift tax apply to joint accounts?

It depends on your relationship with the person you share the account with. If you're married, putting money in a joint account isn't considered a gift for tax purposes. The money belongs to both of you.

But if you're not married, it could trigger a gift tax if one person puts in more than the annual exclusion amount — which is $18,000 in 2024 — and the other person can take out that money.

For example, say you open a joint account with your adult child. If you deposit $20,000 and they withdraw that full amount without putting any money in themselves, it could count as a $20,000 gift from you to them. That's $2,000 over the annual limit, so you might owe gift tax on that extra $2,000. 

If you're not sure how gift taxes might affect your joint account, talk to a tax professional.

Which bank is best for couples? 

The best bank for joint accounts will have low fees, good interest rates and convenient features like online banking. Some popular options include SoFi, Capital One and Chase. Consider local credit unions too. Compare account features, minimum balance requirements and customer service ratings to find the best fit for you and your partner. Get started with our editor’s picks for best high-yield savings accounts and best banks for seniors and retirees.

Can one person take all the money out of a joint account?

Yes — legally, one person can empty a joint account and close it without the other's permission. Each person has full access to the funds, regardless of who deposited the money. This is why trust is a huge part of joint accounts. If you're concerned about this, try the yours-mine-ours approach or set up account alerts for large withdrawals.

How much should each spouse contribute to a joint account?

The contribution amount depends on your incomes, expenses and financial goals. Some couples contribute equally, while others contribute proportionally based on their incomes. If one partner earns $100,000 and the other makes $50,000, you both may agree to deposit 50% in a shared account for joint expenses. The key is to agree on an approach that feels fair and meets your shared financial needs.

Sources

About our writer

Cassidy Horton is a finance writer who specializes in banking, insurance, lending and paying down debt. Her expertise has been featured in NerdWallet, Forbes Advisor, MarketWatch, CNN Underscored, USA Today, Money, The Balance and Consumer Affairs, among other top financial publications. Cassidy first became interested in personal finance after paying off $18,000 in debt in 10 months of graduation with an MBA. Today, she's committed to empowering people to stand up and take charge of their financial futures.

Article edited by Kelly Suzan Waggoner