Wondering whether you should go ahead and open a joint account? Read this.
Is it a good idea to open a joint bank account with your close friend/business partner or a family member? While opening a bank account, this is one of the first few questions that will probably cross your mind. You don’t necessarily have to open it with your partner/spouse. In case you’re single, you can still opt for a joint bank account with any other member of your family, your business partner or a close friend you trust.
Before deciding whether joint bank accounts are a good idea or not, you need to understand the dynamics of their functioning so that you don’t have any reason to regret it later. So, before looking into the advantages or disadvantages of joint bank accounts, let’s understand the working of a joint account better.
What Are The Types Of Joint Accounts In India?
Yes, there are types! To understand which one suits you the best, you need to first see what your available options are. Here goes:
Anyone Or Survivor
If you’re planning to open an account for more than two people, this is the one you should opt for. All the account holders get to operate the account. In the case of anyone’s demise, it not only lets the other account holders continue using the account but also gives them the option to get the balance and interest transferred, according to their convenience.
Either Or Survivor
Since this is the most common type of joint account, you might already be aware of it. It lets two people operate an account at their will and in case one of them dies, the survivor gets to continue operating the account and also gets to transfer the balance or interest at their will.
Former Or Survivor
In this type, only the former (first account holder) is allowed to withdraw money, and the second account holder (survivor) gets to withdraw funds only upon the demise of the first account holder. Before taking control of the account, the second account holder needs to complete a set of few basic formalities and also needs to present proof of the former account holder’s demise.
Latter Or Survivor
While the rest of the functioning remains the same as that of a former or survivor account, the primary difference here is that the first account holder gets the access to the account only after the demise of the second account holder. They can later choose to withdraw funds from this account or get it transferred somewhere else.
According to the law, a minor always needs to have an adult as a guardian while opening a bank account. It, therefore, becomes a joint account by default and continues to be so until the minor turns 18.
We’re sure that most of you thought that joint bank accounts don’t have any further types. But now that you have a better idea about the types, let’s analyse how they could work in your favour or against you.
Additional Reading: 7 Super Smart Savings Bank Account Options For Your Child
Advantages of Joint Bank Accounts
If you have a joint bank account, you don’t need to keep a track of money separately for two or more accounts. Just monitor this one account and you’re set!
No money arguments
It works as a great option for couples as there’s one common place you guys use for saving. No more ‘whose money is that’ arguments happen. That’s a relief, isn’t it?
Mission ‘savings’ accomplished
Since all the account holders are saving in a common bank account, it becomes easier to set common savings goals and achieve them as planned. It works out to be great for couples who’re saving for definite goals like buying a new house, funding a child’s education, etc.
Ease of transfer of rights
Even if there’s no mention in the will, your spouse (co-account holder) will get full legal ownership of the account after your demise. So, will or no will, you get to secure someone’s future.
Disadvantages Of Joint Bank Accounts
Depending on the type of joint account, both account holders could have access to the funds in the account. So, joint bank accounts are a great idea if your spending habits match those of your partner. In case one likes to save and the other likes to spend, a joint account would only lead to more arguments. So, unless your wavelengths match and you’re each ok with the others spending and saving habits, don’t opt for a joint account of this type.
Additional Reading: 6 Lazy Habits To Build Your Savings
To make your joint savings account a success, you need to establish a great communication repo with your partner. Since you’re both equally invested in it, you should take the thoughts of the co-account holder into consideration as well.
Joint bank accounts are no less than making a commitment towards someone, well, financially! It’s a no-brainer that you must take this leap of faith with people you actually trust to avoid the chances of falling victim to frauds and scams. If you’re not careful enough, you could easily lose a lot of money.
Bye bye privacy
If you’ve opted for a joint account, you can’t crib about lack of privacy. The other account holder(s) will know about the status of your finances at all times.
Additional Reading: Creating & Managing A Joint Account With Your Spouse
Now that you’ve gone through what’s good and what’s ‘not so good’ about opening a joint account, we hope that you’re in a better position to take a decision. Looking for more financial products?