How and When Joint Bank Accounts Function.

Joint bank accounts are designed to cater to multiple users who can both contribute to and make use of the money available in the account. This type of account can work well for couples, parents who want to help their aging parents manage their finances, and those who are teaching their children about money management.

While joint bank accounts offer easy collaboration for spending and saving in theory, the situation is much more complex in practice. This kind of account demands more self-awareness and trust than your average bank account.

Take a closer look at what you need to consider before deciding to open a joint account.

Is a joint account a viable option?

A joint bank account can be a good idea, provided that you and your co-owner have a strong and trusting relationship. Whether you're sharing an account with a relative, spouse, or child, communication is key. This process may require difficult conversations about spending and saving preferences. As uncomfortable as this may be, initiating this dialogue may prevent headaches down the line.

"It's crucial to set clear expectations with your co-owner," emphasizes Carrie Houchins-Witt, a financial advisor. "If your teenager hasn't fully grasped the concepts of saving, spending, or taking ownership of their decisions, you should think twice about depositing money into the account without guidance or supervision."

» MORE: Check out NerdWallet's top checking accounts

The Benefits of Joint Accounts

Parents may use a joint bank account to keep an eye on their child's spending habits and transfer money quickly whenever it's necessary.

Couples might use the cash stored in a joint account to pay for shared expenses like rent, utilities, and groceries, in addition to saving for common goals like a vacation.

Adult children may aid their elderly parents in money management.

Joint accounts may be set up to give immediate account access to an adult child when a parent dies, bypassing the need for a time-consuming legal process.

Each account holder is authorized to receive up to $250,000 under federal insurance at a bank or credit union. (Individual accounts and joint accounts are classified as distinct ownership categories, enabling individuals to receive coverage of up to that amount in a joint account and up to that amount in an individual account.)

»MORE: Is it wise to retain accounts at several banks?

The Drawbacks of Joint Accounts

A child could spend excessively and rely too much on their parent's generosity to refill the account.

Overdraft costs are the shared responsibility of account co-owners.

If one account holder fails to pay their debts, creditors have the right to pursue funds in a joint account, potentially compromising privacy issues should the account be monitored by both holders.

for those seeking ways to save, NerdWallet's best savings accounts are worth considering.

Monitoring your finances can be made easy through tracking cash, cards, and bank accounts simultaneously.

Opening a joint bank account is a straightforward process akin to personal accounts. Take note of the following steps:

• - Apply for a joint account with your bank, selecting the appropriate option.
• - Submit personal information of all account holders including addresses, dates of birth, and Social Security numbers.

- Couples who choose to open joint accounts are not mandated to close individual accounts. A personal account is still viable for personal expenses or gift purchases.

A savings account is a secure means of storing money, while interest accumulates. Two options available are:

- SoFi Checking and Savings Account with an APY of 4.30%, and no minimum deposit required for the 4.30% APY rate with direct deposit for SoFi members.

- Bask Interest Savings with an APY of 4.85%, subject to change and must be funded within 15 days of opening the account.

Platinum Savings with CIT Bank

The minimum balance required to earn the Annual Percentage Yield (APY) is set at $5,000 for CIT Bank's Platinum Savings account. Deposits made to this account are insured by the Federal Deposit Insurance Corporation (FDIC).

BMO Alto Online Savings Account

These accounts offer a comprehensive range of services including checking, savings, and investment accounts all in one product. Non-bank financial institutions typically provide cash management accounts. Wealthfront offers the BMO Alto Online Savings Account, which can be accessed through their website.

The Wealthfront Cash Account is an excellent option for those seeking high yields on their savings. With an APY of 4.50% (variable) as of 5/8/23, this account provides a great return on investment. While CDs offer a fixed rate and term, typically with higher interest rates than standard savings accounts, our Cash Account has no fixed term and a more flexible structure.

To compare, CIT Bank CD is a type of savings account that offers higher interest rates than regular savings accounts if you are looking for a fixed-term investment option. You can consider BMO Alto Certificate of Deposit for a more standard option with similar benefits.

All of these investment options are FDIC insured, ensuring that your money is protected. Overall, the Wealthfront Cash Account is an excellent choice for those seeking high yields and a flexible savings structure.

Introducing the BMO Alto Certificate of Deposit. You can take comfort in knowing that your deposits are FDIC insured. Want to learn more about our high-yielding investment products? Look no further than our Current Account, which also offers FDIC insured deposits. Apply now by clicking the links provided.

Introducing the Chime Checking Account

Take advantage of the Axos Bank® Rewards Checking account and enjoy an impressive APY of 3.30%. The rate is based on your rewards, which can be earned through various actions. Making direct deposits (excluding intra-bank transfers) of $1,500 or more each month will earn you 0.40% of the interest rate. To qualify for the remaining interest rate qualifications, a qualifying direct deposit is required. Making at least ten point-of-sale transactions per month using your Rewards Checking Visa® Debit Card, or enrolling in Account Aggregation/Personal Finance Manager (PFM) will earn you 0.30%. You can also consider maintaining an average daily balance of at least $2,500 per month in an Axos Self Directed Trading Invest account, which will earn you 1.00%. The same goes for maintaining an average daily balance of at least $2,500 per month in an Axos Managed Portfolio Invest account. By making a monthly payment to an open Axos Bank consumer loan (excluding commercial and business loans) via transfer from your Rewards Checking account, you can earn a maximum of 0.60%.

Money market accounts are a great option for those who want to enjoy higher interest rates similar to those of savings accounts while still having access to checking account features. UFB Premier Money Market and Discover Bank Money Market Account are excellent choices to consider.

If you have teenagers, you may be curious about alternatives to joint accounts. Consider opening a teen checking account, which often have lower fees than regular accounts and have daily withdrawal limits. However, if your current financial institution does not provide teen accounts, transferring funds may become cumbersome. Check out our top picks for checking accounts for teens on NerdWallet.