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- With joint bank accounts, two or more owners manage deposits in an account.
- Bank accounts are federally insured up for to $250,000 per owner.
- Joint bank accounts might be good options for common goals between couples or family members.
Managing money with another person requires a clear vision and trust. The best joint bank accounts offer a great place to keep your money if you're making big life decisions with a partner or family member. But there may be times when it's smarter to avoid joint banking.
What is an individual bank account?
An individual bank account has one owner who is authorized to access the funds. Individual accounts are federally insured for up to $250,000 per institution.
Individual accounts typically allow you to add an authorized signer. This is someone who is permitted to make everyday transactions, though owners can place limits.
What is a joint bank account?
A joint bank account allows two or more people to be account owners. While you can open a joint bank account with anyone, usually joint bank accounts are opened by couples, family members, or business partners.
One type of joint bank account that you may be familiar with is a kid's savings account. All kid's bank accounts must be opened as joint bank accounts because a minor is not able to open one by themselves.
Comparing individual and joint accounts
The main difference between individual and joint bank accounts is ownership rights. Each co-owner can deposit, withdraw, and make everyday transactions at any time.
Individual and joint bank accounts also have different bank account rules for when someone dies. Joint bank accounts often automatically give the surviving account holder full ownership of the account, while individual accounts pass to the named beneficiary.
Joint bank accounts have more insurance coverage than individual accounts. Co-owners receive as much coverage as they would in an individual account, $250,000.
Therefore, a joint account owned by two people would be federally insured for up to $500,000. An account owned by three people would be insured for $750,000.
However, with more bank account owners, an account can become more difficult to manage. That's why it's most common to open a joint bank account with just one other person.
How to decide between individual and joint accounts
Managing shared expenses and savings
With a joint bank account, it's easy to save up for a shared goal or manage daily expenses for the household. If you're planning to go on a trip or buy a home with your partner, a joint bank account provides an ideal place to store money.
However, you might find it harder to keep track of individual goals since you aren't the only one depositing and withdrawing money.
Considering financial independence and trust
Co-owners have equal withdrawal rights when opening a joint bank account, which means that each owner can withdraw money without permission at any time.
There isn't a rule that requires both owners to deposit money, though. If one person decides to not deposit any money, they can still withdraw from the account. A joint account is appropriate only if you have a good personal and financial relationship with the other person.
A joint account may be a worthwhile option if one person primarily controls the account — for example, if a parent opens a bank account for their child and oversees most of the transactions.
Ideal use cases
Deciding between a joint bank account or an individual bank account will boil down to how you use the account and your goals. If you plan on using the account for everyday purchases, you and the other person will have to be on the same page. Otherwise, it'll be a hassle to oversee.
Overall, opening a joint bank account might be a good choice if you have a common long-term goal with a partner or family member. That way, you'll both be saving money for the same purpose. It can also be helpful to open a joint business bank account if you're running a company and have one or more people helping you with bookkeeping.
If you'd rather have more financial independence or save money for personal goals, like a hobby, an individual bank account may be more suitable. You won't have to justify purchases or communicate about managing the account with anyone.
Legal considerations
Joint bank accounts have a rule of survivorship that's helpful for estate planning. It states that if one account holder dies, the account automatically becomes the surviving co-owner's property. This can be a simple and clean way for someone to transfer money to an heir upon their death, since it avoids the often lengthy probate process.
Joint account owners are also liable for any fees, overdrafts and other financial obligations. Depending on local laws where you live, a bank account that passes to a co-owner by right of survivorship may not be protected from creditors.
How do you open a joint bank account?
You'll have to apply online or at a branch location to open a joint bank account. If you have any questions or concerns, it might be better to schedule an appointment with a bank representative.
Opening a joint bank account will require two forms of identification for both account owners. Bring a driver's license, passport, or other government-issued ID. You'll also include personal information, like your Social Security number, date of birth, and address.
If you don't have a US ID or Social Security number, there are also banks and credit unions that make it easy for immigrants and non-US citizens to open an account.
If you decide to close a joint bank account in the future, keep in mind both account owners will need to be present and authorize permission to have the account closed.
FAQs
Yes, joint account owners have equal access to the funds and can set up deposits, withdrawals, and transfers at their discretion.
Creditors may seek collections for solely or jointly owned debt, since the funds are intermingled.
Consider your level of trust with the other person and the purpose of the money. Joint accounts work well for married couples who need to manage shared expenses and save for common goals.
Yes, it's common to have an individual account to manage personal expenses and a joint account to save for shared goals with a spouse or business partner.
Funds in a joint account will need to be divided by the co-owners. Legally, both people have equal ownership over the money, even if one person never made a deposit.
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