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When Does a Joint Bank Account With a Child Make Sense?

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This question came from a subscriber in California.

This is largely an area of opinion. Lots of things I write about have been subjects of academic study, so I can draw on formal, sometimes peer-reviewed research on the topic. This isn’t that kind of topic –
the “research” is minimal to non-existent. That being said, I am happy to share three reasons I have seen it make sense to have a joint bank account between a parent and a teenage/young adult child. If you know of more, or have a specific circumstance you want to ask about, let me know.

The first is “monitoring.” It is important to understand that this can go either way. The parent may want to monitor what the child does with his/her money (I would say in most circumstances, this is better done with younger and middle school-aged kids). High school and college students should have their own independent bank accounts (depending on age, parents may need to be custodians). I would never say it is “too late” to start, but if you are going to do the “joint” account thing for kids, I think it is better to do this when they are younger. As teenagers, they should have their own accounts – and maybe have regular conversations with parents. The frequency of the conversations would be determined by the amount of oversight required.

At the same time, the potential for monitoring can go the other way. As a young to middle-aged adult, it may be possible that you have a parent that either suffers (due to injury or illness) from the inability to manage their own finances well, or becomes the target of identity thieves. In either circumstance, the child may be on the account to pay bills or help monitor the parent’s account. I have had two clients in my career where this was necessary (and embraced by the parent).

The second reason is in the case of actual joint business. I have a number of clients whose kids are entrepreneurial or are interested in investing early. In one case, the 19-year old son had been doing well “trading” in an online pretend Wall Street investors game (not that he was winning the contest, but that he was making good, well-thought out choices). In that case, my client “staked” the child in a joint investment account and they split the returns. In another case, a young woman wanted to buy a property to live in with a rental unit. The parent provided the down payment and a joint bank account was set up to manage the property.

Finally, I think of pure convenience. I am thinking about college. There are college tuition and things like rent and groceries and regular expenses that need to be paid in college. In many cases, parents are supporting these expenses entirely or partially. The easiest way to do this is to have a joint account that a parent can deposit into where they live… and a child can write a check or use a debit card from where they are in school. Obviously, this one may overlap with the first one above (I’ve heard stories about kids who have dropped out of college and not told their parents – who continue to send money for rent and tuition for months afterwards).

Most instances of joint banking between parent and child are instances of education. Parents want kids to learn about saving, spending, and managing an account with a little help at the beginning. If you want to formalize some education for the kids in your life, we created the Mindful Money “Foundations” course. There is a modest price (to cover costs) for individuals to go through it, but if you are part of (or work with) a group of young adults, I am happy to give the group free access so long as they make going through the course a group activity.

If you know of such a group, Contact Us.

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