Opening a joint savings account: what you should know

What are the benefits of a joint savings account?

A joint savings account offers a number of benefits, particularly for couples who are starting their lives together and want to be unified on the financial front.

1. Streamlines your savings

The most obvious benefit of having a joint account is it can make it much easier to track incoming and outgoing finances, manage a household budget, and combine your savings efforts.

With one centralized account, you can pool your savings together in one place and avoid the hassle of regularly having to move money between each other’s personal accounts. No more time wasted constantly sending and receiving e-transfers or managing elaborate spreadsheets to keep track of who contributed how much, and when.

A joint savings account is also just downright convenient. You won’t need to bug your partner (or vice versa) every time you want to view the account. Instead, you’ll each have your own secure logins for the same account and can access the funds from your own devices at any time.

A joint savings account can also boost transparency, help ensure everyone is on the same page financially, and makes it so everyone is constantly aware of all the account’s activities. It makes saving for a myriad of common goals easier too. Think along the lines of a family vacation fund, a down payment, home renovation, a child’s college fund, an emergency fund, or even just everyday savings.

2. Increased federal CDIC insurance coverage

With a joint account, you may be eligible for more deposit insurance coverage on your savings.

The Canada Deposit Insurance Corporation (CDIC) is a Crown corporation that insures the money you hold in eligible deposit accounts at member financial institutions (like the big five banks and some online-only banks, including EQ Bank²) in case of failure.

As standard, the CDIC provides protection up to $100,000 on eligible deposits, per insured category, per depositor, held at a member bank. For instance, if you have a personal savings account and a GIC with EQ Bank held in only your name, you’d be eligible to receive a combined $100,000 in coverage as both accounts fall under the same category according to the CDIC – “deposits held in one name.”

The kicker: the CDIC insures joint accounts separately under its own distinct category. As a result, you and your co-holders could be eligible to receive up to $100,000 in separate coverage for your joint account in addition to up to $100,000 for deposits held in your own name.

What does this all add up to? A joint account, with two owners, could theoretically enjoy up to double the coverage at the same bank.

3. Estate planning

A rarely known but vital benefit of having a joint account with your spouse is to facilitate estate planning.

Many married couples don’t realize that upon one’s death, the surviving spouse might not have immediate access to the savings account if it’s held exclusively in the deceased’s name. If the estate goes through the probate process, banks may lock the funds in the savings account until the probate is completed (which can sometimes take several weeks).

The way around this is to have a joint savings account where, due to the right of survivorship, even if one account holder dies, the other automatically gains full ownership of the account. Since the account is directly inherited by the surviving spouse, the money in the joint account is kept separate from the estate and the probate process, helping avoid probate tax while also ensuring the saving account is immediately accessible.

Just be sure to check if the joint savings account in question does offer the right of survivorship. Rules around the right of survivorship may also be exclusive for married couples and not available for joint account holders who are just friends or family members.

Who are joint savings accounts right for?

Contrary to what you might think, joint accounts aren’t exclusively for married couples (for example, EQ Bank allows you to open joint savings accounts with up to three people). A joint account can include common-law partners as well as closely trusted friends and family members.

Above all, joint accounts are designed for people who know and trust each other. They are intended for two or more people who likely have other joint accounts or combined incomes, who live together, or are working towards a shared monetary goal.

Because all account holders will have full and equal access to the funds in the account, it’s absolutely crucial that you and your fellow account holders are on the same page about finances, budgets, and withdrawal rules and have complete trust in one another. Remember, any of the co-holders can withdraw all the funds in the joint account at any time with no permission, and all co-holders will also be responsible if the account is in overdraft or a cheque bounces, so make sure you only share a joint account with someone you trust completely. Transparency and constant lines of communication are key to successfully sharing an account with someone.

How to open a joint savings account?

While the exact process can vary a bit from bank to bank, opening a joint account is pretty much like opening any other kind of savings account. All account holders will need to provide the following info:

• Valid Social Insurance Number
• Valid ID
• Date of birth
• Phone number
• Email address
• Proof of physical address
• Bank account or debit card information for funding your new account

With EQ Bank, for example, you can open the account entirely online in minutes. If you’re an existing EQ Bank account holder, you can create a separate joint savings account or convert an existing Savings Plus Account into a joint account. From there, you can invite up to three other co-holders. If you’re not yet a customer, you’ll need to sign up with EQ Bank before you can accept an invitation. Once you’ve signed up with EQ Bank, you can choose to accept the invite or you can also set up your own joint account with others. All co-holders will have equal access to funds within a few days of opening the joint account.

 

Tips on managing joint saving accounts

Having a joint bank account with someone can be a real boon as long as you follow a few simple guidelines:

• Trust and a unified monetary goal are key, so make sure you have open lines of communication between all account holders.
• To ensure everyone is on the same page, set up ground rules around what you’re saving for and how much you plan on depositing and withdrawing (and how frequently). Write the rules down and have everyone sign a common agreement and even “book” a monthly meeting to go over finances.
• Continue to keep your own personal account separate from the joint account for your own unique personal financial needs and savings goals. For instance, it can be a smart move for married couples to use a joint account for communal savings like an emergency or kid’s college fund while also each keep a separate personal account for their own savings goals like new clothes, video games, or gifts for their spouse.
• Keep a monthly budget and set up recurring deposits to streamline savings.

The bottom line

A joint savings account can make managing your personal finances and achieving shared savings goals with a trusted loved one or friend a whole more lot simpler, efficient, and transparent. Just be sure to have a detailed financial discussion with the joint account holders, set up ground rules, and ensure you’re on the same page about what shared financial goals you hope to achieve. Having a joint savings account is a major financial and emotional commitment.

^{1 Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
2 Equitable Bank is a member of CDIC. EQ Bank is a trade name of Equitable Bank. Deposits made under EQ Bank and Equitable Bank are aggregately eligible for CDIC protection up to $100,000, per insured category, per depositor.
*Based on research conducted by Equitable Bank comparing HISA interest rates of Canada’s ‘Big 5’ banks over a 12-month span on an investment of $100. Assumes no additional deposits or withdrawals made. Research considered comparable high-interest savings account interest rates based on data taken from public websites as at October 8, 2020. Promotions and Rate Premiums are excluded.}