My partner and I have recently moved in together. We are both in our mid 50s, divorced and have adult children. My partner is keen for us to share a bank account which I don’t have a problem with it because we pay for everything together, but my son doesn’t want me to. What do you recommend?
Anne, ACT
One of the most common concerns about a joint bank account is that it puts your financial independence at risk. But the good news is you can have a joint account to make the admin in your life easier – you just need some guardrails to protect yourself. Here’s five.
1. Have a primary ‘me’ account and a secondary ‘we’ account
Keep a “me” account into which you receive your personal income and from which you manage your own expenditure. Then set up a “we” account for shared day-to-day expenses into which you both contribute from your respective personal accounts. You can mirror this framework for your savings, too. For example, if you’re contributing to a child’s wedding you may set aside savings in your “me” savings account; if you’re planning a joint holiday you might contribute to your “we” savings account. Having personal savings over which you have control also acts as an emergency fund – and as an “f… off fund” if you need to exit a toxic relationship.
2. Be clear upfront what expenses are to be paid from your joint account
It seems so straightforward to simply define this as “essential expenses” or “shared household expenses” – groceries, utilities, takeaway. But it can get tricky. Consider this couple’s experience: she was buying skincare from the joint account as part of the grocery shopping. He didn’t think this was essential. However, he was a coffee fanatic and bought specialty coffee beans “for the household”. She thought this a luxury not an essential. What if you want to buy organic produce and she doesn’t? What if he is a meat-eater and she is vegetarian? Be very clear on what’s in and what’s out. You need to have frequent open discussions to check in and make sure that you are on the same page, and review and re-set expenditure rules if you need to. If you can’t do this, then it could be a disaster.
3. Set parameters for joint spending
I recommend creating parameters for the types of things you’re likely to buy from your joint account. Here’s a few examples. If we go out to dinner, we’re happy to spend $x on our night out. If we go out for a special occasion dinner, then we’re happy to spend $y. We’ll buy birthday gifts for joint friends from our joint account – with a budget of $x. Our ideal spend for a bottle of wine is $y.
4. Manage access to your joint money
For your household account:
Set a minimum account balance. This is a buffer so that you never face that awkward moment when you go to pay for the groceries and there’s insufficient funds – but not enough to create a big risk. This might be something like $2000 or $3000.
Set a maximum account balance. This is designed so that any funds beyond what you need for your living expenses are directed into savings. For example, if your usual monthly expenses are $1200 a week, then your monthly expenditure will be $5200. Add your minimum buffer – and this means you may want to target around $7200 to $8200 in this account.
For your savings account:
This account is where ideally you are building savings for the fun things you want to do together, so you need to add a layer of protection to it. I recommend that you set the account up as “both parties to sign”. This means that the only way either party can withdraw funds from this this account, is with the authority of their partner.
Don’t add a credit card for both of these types of accounts. If you have a credit card with a partner who overspends, it affects your credit rating. Use a debit card instead.
5. Review statements at the end of each month
Set up online banking so you can log in to review your account statement to ensure that you are on the same page regarding spending. This discipline will help you to ensure you are managing your money wisely, and potentially identify savings. It will also help you to identify any fraudulent transactions on your account. Believe me, I know. My husband and I were going through our transaction statement and identified a series of payments to a vendor for odd amounts of $87 or $89. It turns out my account was hacked and the hacker had managed to withdraw almost $500.
By Kate McCallum, financial adviser and author of The Joy of Money; multiforte.com.au
Email questions to: hello@tonicmag.com.au
The information provided is general information and not personal advice. Tonic is not a financial advisor. You should consider seeking independent legal, financial, taxation or other advice to check how the information we publish relates to your unique circumstances. Tonic is not Iiable for any losses caused, whether by negligence or otherwise, arising from the use of, or reliance on, the information provided directly or indirectly, by this website.
Want more Tonic delivered straight to your inbox? Subscribe here