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Still Have a Joint Bank Account With Your Parents? Here's Why You Should Get Your Own

Lyle Daly, The Motley Fool

A joint bank account is good when you’re a minor, but once you’re 18, it’s time to open your own.

young woman holding a piggy bank

Image source: Getty Images

If you got a bank account as a minor, then it was probably a joint bank account with one of your parents as the other account holder. Most banks won’t let a minor open an account alone, so a joint account is the only option.

While a joint account is a great way to get started with banking when you’re young, you shouldn’t keep using it as an adult. At that point, a bank account that’s solely in your name is a must, because continuing to use your joint account could end up costing you.

The risks of using a joint bank account

Using a joint bank account may not seem like a big deal, especially if it has been smooth sailing up until now. Although you could have no problems with a joint account, there are several risks involved.

Your parent can withdraw money from the account. On joint bank accounts, both account holders have full access to the balance. It doesn’t matter if you’re the only one depositing money, the other account holder could withdraw it all.

Sadly, plenty of young adults have lost money because they had a joint account and their parents made a withdrawal. I imagine that most parents wouldn’t do this, but regardless, it’s safer to be the only person who can access your money.

Money in the account could be seized for your parent’s debts. Even if your parent would never touch your money, when they’re an account holder, it’s considered one of their assets. That means if their assets are seized, it could include the money in the account.

There are many situations that can result in a seizure of assets, and it’s often the result of unpaid debt. For example, if a parent owes the IRS back taxes or they have a judgement against them in court, it could lead to a seizure of any cash in your joint bank account.

Your transactions won’t be private. When a parent is on your joint bank account, they have all the same privileges that you do, which means they could access your transaction history. Depending on how private you are, this may not matter to you, or it may be your worst nightmare.

How to get your own bank account

Opening your own bank account is a simple process. All you need to do is:

  • Look for banks. If you’ve been happy with your current bank so far, then you can stick with them. If you want to shop around, here are some of the best banks.
  • Pick a bank you like. The most important things to look for are no monthly fees and plenty of ATMs you can use without paying a fee.
  • Decide what type of account(s) you want to open. It’s generally best to open a checking account that you use to pay your bills and a savings account that you use for your savings (duh) and your emergency fund.
  • Open the account. Most banks allow you to do this either in-person at a local branch or online. You’ll typically need your government-issued ID and proof of address (if your ID has your current address, then it can also be your proof of address).

What to do with your joint account

Once you have your own bank account, it’s time to say goodbye to your joint account. Here’s the process to do so:

  • Update your payment information anywhere that you have your joint bank account info saved. For example, if you use it to pay your credit card or your cell phone bill, you’ll need to change that to your new bank account.
  • Transfer the money in your joint account to your new account.
  • Notify the bank that you wish to close the account. It’s easiest to do this in person, but you can contact your bank online or by phone to find out if there are other closure options.
  • Safely dispose of your previous account’s debit card and any checks that you had.

By the way, if your parents occasionally deposited money into your joint account to help you out, they can also transfer money to your new account as long as they have the account information. So you don’t need to keep a joint account open solely for this reason.

Banking on your own

A joint bank account is a valuable tool to protect your money and to learn how banking works as a minor. Once you reach adulthood, it’s in your best interest to get your own account that’s exclusively yours. You’ll avoid the possible risks of a joint account, and you’ll be taking an important step towards financial independence.

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This article was originally published on Fool.com