To open a joint account or not?

With the wedding season upon us, the one question I often get from couples is: how do we manage our money now that we live together? And the second most commonly asked question is if they should open a joint bank account.

Before we get into the advantages and disadvantages of a joint bank account, you and your partner first need to decide on the type of marital contract you want to enter into. There are three types of marital contracts you can choose from:

1. Community of property

 This is the default marriage contract in South Africa, therefore making it the most affordable option. If you do not sign an antenuptial contract (ANC) before the date of the marriage, you will automatically get married in community of property. If you get married in community of property, it means that all of your assets and liabilities (before and after marriage) are merged into one joint estate. Once you are married both of you will be jointly and severally liable for the full debt amount, and it will be your joint responsibility to pay the credit providers back

2. Out of community of property with accrual

Getting married out of community of property with accrual requires you to sign an antenuptial contract with a lawyer before the date of marriage (the date you sign the legal document). The accrual is a way to ensure that both spouses in a marriage gain a fair share of the estate should the marriage come to an end.

3. Out of community of property without accrual

With this contract, you and your spouse are separate entities; with this contract, ownership is clear-cut, each spouse is responsible for their own estate, before and after the marriage.

Joint accounts are meant to help couples/families manage their money better, together, but what are the advantages and disadvantages of opening a joint bank account with your partner?

Advantages 

• It allows the two of you to contribute to one account where you pay your joint household expenses
• It helps you keep track of your monthly expenses and ensure that the expenses are paid (I had a client who thought her partner was taking care of his side of the expenses, but only found out a year later that most of the expenses were in arrears!)
• It saves you the hassle of having to send money to each other which can be costly due to banking fees
• Can help you manage your finances better as there is transparency and accountability
• Both of you have equal access to the account, this can create an environment where its easier to discuss money and plan together

Disadvantages

• It can lead to fights if one partner’s spending habits derails the budget
• If one partner dies, the account will be frozen until their estate is wound up. This could spell a financial disaster if all the immediate cash flow is in the joint account
• If the account gets overdrawn, both of you are severally and jointly liable.
• A joint account offers no privacy, you both know exactly where and on what your partner is spending money on

 Before you open a joint account, you have to look at your own individual situation and also look at both the advantages and disadvantages of a joint account.

Here are some points to consider:

1. Transparency

Before opening a joint bank account, you and your partner have to be honest about how much you both earn, your different financial responsibilities and debts you have.

2. Budgeting

To avoid unnecessary fights, you and your partner will have to budget and agree on how much you will both contribute into the joint account, ideally, this should be in proportion to how much each partner earns.

3. Shop around

Do your research before opening an account by shopping around for the account that meets both your needs. The bank account should be cost-effective, preferably with low fees etc

4. Know your money personalities

If either one of you is the spender and the other spouse is a saver, your opposite money personalities can potentially cause fights about money. You have to be honest about your spending habits and make a decision whether or not a joint account will work to the advantage of your union or not.

The ideal situation or middle ground would be for each of you to still hold their separate account and contribute to a joint account where you manage the household budget. This still ensures that you maintain financial independence but also allows you to manage your household expenses and financial goals together.

*This article first appeared in City Press

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