Should you open a joint savings account?

William Jolly By on December 19, 2018
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Opening a joint savings account with a partner isn’t a decision that should be made lightly.

When you open a savings account it’s generally held in your name only. But there may come a time, usually in a relationship, when you might decide to pool your finances together with another person. To do this, you’d probably choose to open a joint savings and transaction account.

What is a joint savings account?

Joint bank accounts are accounts held by two or more people. They’re commonly held by couples but not exclusively so: friends, family, housemates and business partners are all examples of people who can open a joint savings account, but there are reasons why they would reconsider doing so. We’ll go into greater detail on these reasons later.

Joint savings accounts aren’t usually separate bank account products. They’re simply a standard savings or transaction account held in more than one person’s name. With a joint savings account, you have two incomes earning interest instead of one, and twice the savings power. By linking a joint transaction account to your savings account, you can also allocate more than one income towards bills and living expenses.

Types of joint savings accounts

There are two different ‘types’ of joint savings accounts, which are really just different ways of opening one:

  • Both parties to sign: each party (i.e the people with the account) must sign an agreement before the other person can spend money from that account.
  • Either party to sign: both parties can transact independently of each other without needing approval.

Each option has its merits. Requiring both parties to sign means you’re not leaving yourself open to having your partner splurge all your savings on a new car for themselves without your approval, but is a less flexible option. The ‘either party to sign’ method is perhaps a more true definition of a joint bank account as it implies trust of the other person.

How to open a joint savings account?

Applying for a joint savings account is a very similar process to opening a solo savings account – you just have to multiply every step by two. Once you’ve found a savings account with a high interest rate, low fees and flexible conditions, and are confident both you and the person you’re opening the account with are over 18, then you just need to follow these steps:

  1. Apply for your account online, over the phone or in-branch
  2. Verify both of your identities by providing names, personal details, driver’s licenses, passports or Medicare cards
  3. Select the number of debit cards and accounts you’ll need – generally one per person
  4. Confirm your application and start saving!

Of course with joint savings accounts there is obviously more at stake than just your money – there have been countless studies done proving that finances are one of, if not THE biggest cause of strain on relationships. According to a 2017 study by Greater Bank, nearly one in five Australians admitted to having a relationship breakdown related to finances.

Having a joint savings account can lead to arguments and even the breakdown of relationships, so it’s not a decision that can be made with a coin toss. You should add an extra step at the start where you and your partner (or whoever you’re opening the account with) sit down and make sure you’re both comfortable with having a shared savings account, and that you’re on the same page money-wise…

How do you close a joint savings account?

Closing a joint savings account is much the same as opening one:

  1. You need to get a list of your direct debits and cancel them all, or move them to your new account
  2. You have to pay off any overdrawn amounts if your balance has gone below zero
  3. You have to call your bank or visit a branch and receive confirmation the account has been closed

But just as you need approval from both parties for opening the account, you also both have to agree to close the account. If there’s a dispute and both of you can’t agree to cancel the account, you’ll have to settle for notifying the bank of this so they can temporarily freeze the account.

What are the advantages and disadvantages of a joint savings account?

Disadvantages

The main disadvantage of a joint savings account isn’t a problem with the product itself, but rather what can go wrong if the people holding the account aren’t trustworthy. There are far too many examples of marriages breaking apart or relationships failing where one of the people involved drains the bank account of all the money and runs away, or refuses to give it back. They would be entirely within their rights to do this as a joint account holder (in an ‘either party to sign‘ account), and to get this money back you’d have to take up legal action. This can be very expensive and time-consuming.

While your other account holder might not willingly syphon all your money away, a joint savings account also presents the risk of unequal distribution of money. It can be annoying when one account-holder is trying to reach a savings goal, but the other decides to spend $500 on new clothes or a new flat-screen TV without consulting you. Plus, there’s the added aspect of your partner seeing everything you’ve spent money on. You can’t hide your shame!

Would you trust a partner with a card that’s linked to your hard-earned savings? Greater Bank’s survey found a partner being careless with money to be a ‘frustrating financial behaviour’ among 95% of people. So it’s probably beneficial to make sure you’re on the same page before opening an account together.

Couple arguing
Joint bank accounts can lead to arguments.

Advantages

With a joint savings account, you can earn more interest and pay only one set of fees instead of two. Of course, that second point is moot if you don’t pay fees on your bank account anyway. It can also be easier to meet your bank’s bonus interest rate conditions with two incomes instead of just your own. So it can pay to merge your finances into the one account.

Joint accounts can also make it much easier to manage bills – each of your payments are coming from the one account now, and you can even have a dedicated account purely for things like rent, utilities and groceries. Discussing with your partner how much you’re each willing to contribute to bills on a regular basis can really make this whole process much smoother.

And while this doesn’t have anything to do with savings, opening a joint savings account can really bring a sense of ‘togetherness’, whether it’s in a relationship or just among friends. Of the Australian couples who decided to open a joint bank account, Greater Bank found 45% of them did so when married, while 31% took the plunge only after living together.

Should I open a joint savings account?

We can’t possibly answer this for you – it will entirely depend on your level of trust and comfort with the other person or people. What we can say however is that joint bank accounts are seemingly going out of fashion.

ME conducted a survey of more than 2,000 transaction account holders in June 2018. Of those in married or de facto relationships, 71% of them said they shared a joint account. But when you take a look at the numbers:

  • 54% of Gen Z (18–24-year-olds) had a joint account;
  • 68% of Gen Y (25–39-year-olds);
  • 70% of Gen X (40–54-year-olds);
  • 76% of Baby Boomers (55–74-year-olds)

So younger generations are less likely to adopt joint savings and transaction accounts, although given the fact married couples are the most likely to have a joint savings account, it isn’t surprising Gen Zs haven’t yet taken to sharing their finances yet. Regardless of age, the key reasons for taking out a joint account were:

  • To build trust and a closer relationship (72%);
  • They’re useful for day-to-day spending (64%);
  • They reduce the risk of excessive spending (55%)

When asked why they chose not to open a joint account, the top responses were:

  • It could lead to a breakup or divorce (48%);
  • They’d feel guilty spending their partner’s money on themselves (38%);
  • They want their own financial independence (36%);
  • It could lead to arguments (30%);
  • A lack of trust in their partner’s spending habits (11%)

ME’s Money Expert Matthew Read said these results are not surprising.

“As with all things, younger generations tend to question what was once assumed and the traditional expectation that couples share accounts may be part of that questioning”, he said.

“There are practical benefits that can come from sharing accounts. For example, it’s easier to track spending and set and manage budgets.

“But paradoxically, having separate accounts and shared lives can force each individual in a relationship to talk more about money together and to share that responsibility. Shared accounts can sometimes lead to one person taking full control while the other remains blissfully unaware.”

Savings.com.au’s two cents

Joint savings and transaction accounts aren’t very different from a single account, and generally, their pros outweigh the cons. But in some situations, the cons can have disastrous consequences on a person’s life, such as the other account holder draining all the money and cutting off all contact. This happens far too often.

Even if you are 100% trusting of the other person, you don’t have to allocate 100% of your funds to the joint account. You can open a joint savings account but still have your own personal account too – you could maybe allocate around 60-70% of your income to the joint account while keeping the remainder for yourself. Just make sure you aren’t paying two sets of fees, and above all, make sure you and your partner are satisfied with your financial setup.

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