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If You Love Your Kids, Don’t Open a Joint Bank Account With Them

by on January 24, 2012

If You Love Your Kids, Don’t Open a Joint Bank Account With Them

Opening a joint bank account with your child is a lot like getting a tattoo of your lover’s name – you’re going to regret it eventually. That sounds harsh, but it’s true. Just ask the millions of Americans stuck paying for their children’s debt.

It’s understandable that as a good parent you want to make sure your kid is given the best start possible into the world of personal finance, but you don’t need to put your credit score on the line just to get them a higher-tiered checking account. If you really care about your child’s financial future, you’ll let them handle their own banking.

Here’s why:

  • Your child’s debt is your debt. If your child gets into a car accident or gets sued for outstanding credit card debt, all of the assets in your joint account are liable to be seized. If the account needs to be plundered to pay off outstanding debts, both of your credit scores will take a sizeable hit. Your credit score will also be dinged whenever they apply for a new credit card or miss a bill payment.
  • Your debt is your child’s debt. When you agree to be financially liable for your child, your child is also agreeing to be financially liable for you. If you default on your mortgage or get into some other sort of debt, your kid’s account could be seized because your name is on it. This only applies to children who are legally recognized as adults, but that will likely be your child’s case because…
  • Once you open an account together, you’re stuck together. In many cases, the only way to get your name off of your child’s account is to close out the account and open a new one. Since many joint accounts are grandfathered past new banking fees over the years, many families are reluctant to force their children to open a new one. This can lead to some very serious consequences when your child reaches legal adulthood and starts taking on the risk of debt and liability.
  • There are serious consequences when you’re older. If you’re sailing into your golden years and your child offers to join your bank accounts to help manage your assets, you should always politely decline. By the time you retire, you should have all of your assets shored up in your accounts. If you allow your kids to be joint owners, you’re giving them unadulterated access to your savings. If they’re sued, you could lose everything. If they’re careless with their spending, you could lose everything. Worst of all, if their name is on the account when you pass away, they’re entitled to all of your savings by right of survivor-ship.

When it comes to opening a joint bank account with your child, just say no. Even if it seems like a good idea at the time, these decisions always have a way of coming back to haunt you – and in this economy you can’t afford the risk. Instead, set your kid up with their own account and teach them how to manage the fees and how to build a good credit rating on their own. You’ll both be better off in the end.

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