The good, the bad and the ugly on joint savings accounts 1

Here’s the good, the bad and the ugly when opening a joint savings account

Aneth Ng-Lim

Posted at Sep 12 2022 02:25 PM

Contrary to popular opinion, not all joint accounts are opened by husbands and wives, or those in romantic relationships. Many such accounts are owned by parents with their children, between siblings, and among cousins. In fact, you do not need to have familial ties with someone to be able to open a joint account, which is why many friends have one, plus those who are dating, about to get married, or are live-in companions.

Why open a joint account? The easy answer is to have one more person help you manage your finances. But help is the all-important word here. When the situation is no longer helping you, it’s time to reconsider going your own separate account ways. 

Even before you open one, it’s good to set some ground rules concerning the joint account. When you open a joint account, you are basically handing over your wallet to that other person. Unless your wallet never runs out of cash, it’s good to have a talk on the DOs and DONTs so things do not go from good to bad to downright ugly.

The Good

When you share money goals with someone, owning a joint account can be a good thing. You can pool your savings together towards buying a home, or a car, or setting up a business. Many couples planning to get married soon open a joint account to save up for their wedding, and when the big day is set, conveniently use the same account to pay for the expenses. 

That’s another nice thing about a joint account - you can split expenses evenly, assuming the money in the account is equally yours. This is why spouses and those who live together find owning one quite handy. You can both put in money, and you can both take out money, supposedly for expenses you both made, or benefit you both.

My “good” tip: agree on what the joint account is for, and use it for that purpose alone. This way, you also limit your exposure. Do not treat the joint account as your personal account. Always have your own account which you can use for all your other personal money goals.

The Bad

Don’t forget to have that talk before opening a joint account to make sure you don’t discover the bad side of owning one. If you agree to save P100,000 for a car down payment, ideally no one should withdraw any funds without the other being told. But money emergencies do happen, and in these cases, you need to have rules as well. If the other needs cash and would like to borrow from the joint account, will you allow it? Do you have to tell each other before any withdrawals? How soon should the money be returned? And will you charge interest?

When it comes to spouses or live-in partners that have double income, you may want to agree on how much each of you must deposit to the account, if it is meant to pay for household expenses. You can set the same amount, or one pays more because she or he earns more. But what happens if one of you did not make the monthly deposit? Or there is a new or higher than usual living expense, such as a new mobile phone? Ask these questions so you can plan out all scenarios and get these tricky conversations out of the way.

My “bad” tip: stay on top of the joint account through a mobile app, or by enrolling for withdrawal alerts. Check the monthly or quarterly bank statements when they are sent to your email, or via snail mail. Yes, they are your husband, wife, true love, father, mother, brother, sister, best friend…still, trust, but verify. 

The Ugly

What happens when the money is gone? As in, not just less but wiped out. Obviously, this is the ugly scenario. And this can happen to anyone thanks to a joint account. 

That “or” in your account name means the other party can withdraw and even close the account without your knowing, or permission. That’s because you have surrendered your sole rights to your money at the time you opened the account. This is why it’s important to set limits (do not put all your money in a joint account) and stay on top of the account (get alerts or inquire balance with online and mobile banking). With the first, you can contain your losses, and with the second, hopefully you will see warning signs and stop further damage. 

My “ugly” tip: Cap your joint account exposures. Make sure to set limits and do not give them access to your life savings. By watching account activity, you will notice unplanned withdrawals that may hint to your co-depositor having financial problems. Plus, check with the bank’s terms and conditions what happens to the money when one of you passes away. 

Are you both okay with the money just going to the surviving co-depositor? Or you want your family to get it? Knowing the bank’s policies can help you sleep better at night.

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Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.