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Oct 6, 2021
Personal Finance

What is a Joint Savings Account?

Managing money with a spouse or other close family member can be easier with a joint savings account. You both have access to the funds without putting all the responsibility on one person. Before opening a joint account, you should understand how they work and what precautions you should take.

What is a Joint Savings Account?

Any joint account is a bank account owned by two people. Both parties have equal access to the funds, with the ability to deposit and withdraw funds whenever they want. Just like an individual savings account, you'll earn interest on your savings account. If you open an online banking account, you may earn even higher rates of interest due to the bank's lower overhead.

The point of a savings account is to leave your money in there to grow (earn interest). During normal times, you're limited to six withdrawals per month in exchange for earning higher interest rates. During the economic turmoil resulting from Covid-19, the federal government removed the limit on withdrawals to more easily allow people to access their money in times of need.

How does it Work?

A joint savings account works just like an individual account, except instead of opening it in your name alone, you'll add your spouse or other relative to the account.

Unlike an individual account, you both own and have access to the money. You equally own the funds and either party can make deposits or withdrawals without the other party's permission. A key component of successful joint ownership is trust.

Before opening a joint account, it's a good idea to first discuss expectations. Decide why you're opening the account. Are you saving for a specific goal or is it just a place to put your money to let it grow? If you're opening a joint savings account with your teenager to teach him/her responsible use of their money, lay out the expectations so they learn how to manage their money as well.

What are the Benefits of a Joint Savings Account?

  • You get higher FDIC insurance coverage. Each person is covered up to $250,000 at a financial institution. If you have a joint account, it means up to $500,000 is insured in your account rather than just $250,000.
  • It's easier to manage joint expenses rather than putting the responsibility on one person or attempting to split the costs. When you have one account together, you can easily manage the funds coming in and out of the account. There's less paperwork and confusion.
  • A non-working spouse can feel equal, because they are certainly not less equal. If one spouse works and the other doesn't, a joint account may be a healthy way to maintain equality in the relationship.
  • You can set and reach shared goals. When you have similar financial goals, you can be on the same page, while also keeping one another accountable.
  • It may cost less. It's best to find a high-yield savings account that doesn't charge any fees, but if you end up with an account with minimum balance requirements, you may reach the requirement easier and avoid monthly maintenance fees.

What are the Disadvantages?

  • Both parties have equal access to the funds. If one person is a spender, it could cause arguments between you if there's less money in the account than intended. Even if you deposit the funds, the other party has just as much right to withdraw the funds as you do.
  • Shared liability. If either party is irresponsible with the funds, you are both responsible for any overdraft fees, penalties, or account charges.
  • If one party defaults on debts that get to collections or a judgment, the collectors can come after the full amount of the joint savings account since it's in both names.
  • There's less privacy with a joint account. If you're trying to surprise your loved one, they will be able to see the transaction if you withdraw funds. Some households get around this by maintaining separate accounts in addition to a joint account.

How to Open a Joint Savings Account

The process to open a joint savings account is much like opening an individual savings account. Here are the simple steps:

1) Choose the bank or credit union. You can open a joint savings account at a brick and mortar bank, online bank, or credit union. Compare your options. Look at the minimum balance requirements, monthly maintenance fees, other fees, and APY. More and more banks offer zero cost savings accounts or high-yield savings accounts, so make sure to shop around to find the option that works best for you. You may also want to look at what the bank does with your money. There are a growing number of options that ensure your money is used in ways that align with your values. For example, Atmos offers banking products that reverse global warming. This will allow you to know you're contributing to positive change in the world while you're getting your financial house in order too.

2) Select the savings account option you want. If one of you already has an account at your preferred bank, you may be able to add another account owner. You may have to contact the bank or go in if it's a brick-and-mortar bank. Online banks don't require you to come in person since they don't have a branch. You'll scan in your identifying documents to prove you are the account owners to either open an account or change an existing account.

3) Enter your personal identifying information. Each bank has a different process, but most require the following information:

  • Full legal names of both parties
  • Address for both parties (proof of your address usually required)
  • Dates of birth
  • Social Security numbers
  • Phone numbers

Who Owns Money in a Joint Savings Account?

With a joint savings account, it doesn't matter who owns the money. Once money is deposited into the account, both parties have equal access to it. In other words, both parties own it. If one partner becomes incapacitated, the other partner takes 100% ownership of the funds.

Tips for Owning Joint Accounts

Joint savings accounts are a great way to save for a shared goal or share finances with a loved one, but there are certain considerations you should make to get the most benefits out of it.

  • Create an agreement as joint account holders - Don't assume you are on the same page, talk about it. The account owners should discuss use and access of the funds. Do you have the same financial goals for your shared account? If not, find a middle ground so there's less arguing and stress about how either party uses the funds.
  • Appoint one person to manage the account - While both parties have access to the funds, it may get messy if nobody takes ownership over the account. Instead, consider putting one person in charge of the account and maintaining or growing the right balance of funds. This avoids missteps or arguments from bounced checks if each person thought the other was managing the account.
  • Have individual accounts too - Remember, you lose a degree of privacy when you have joint accounts. Both parties can see all transactions. If you want some things to be a surprise or you want a certain level of independence, consider having your own account too.
  • Look for the best deal - Bank accounts can get expensive if you aren't careful. Look for a savings or checking account with no minimum balance requirements and no monthly fees. Also pay attention to the interest rate you're paid. Some banks pay tiered rates (paying higher rates for larger balances.)

Alternatives to Joint Savings Accounts

Joint savings accounts aren't the only option. If you aren't comfortable sharing finances quite yet or you want a certain level of independence, consider individual accounts versus being a joint account holder.

You can each have your own accounts and you can even transfer money to one another whether you use the same bank or different banks. The key is that you are each comfortable with the decision. Some couples have a joint checking account for bill paying and then individual accounts for their spending or savings.

If you want your money together but want to limit how each person can use the funds, consider pooling funds together to open a CD. The money earns a fixed rate of interest, but you can't withdraw it (or shouldn't because you'll pay a penalty) during the term of the CD.

Final Thoughts

A joint savings account is a great way to reach financial goals together. Many couples use a joint bank account for their checking and savings accounts to get on the same page financially.

It's not a requirement, though. Whether you have joint savings and checking accounts or separate accounts, you can still split expenses, share funds, and have financial peace within your marriage. Each couple must decide what's right for them.

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