Joint savings accounts are bank accounts that are established for the mutual benefit of two individuals. Married couples will often establish an account of this type in order to build financial security for the family unit. At times, a parent may establish this type of account for a minor child. Today, domestic partners and even friends may choose to open a joint account in order to save money for long term security or for a specific short-term project.
For households that want to build financial security, a joint savings account is often an excellent first step. Joint accounts tend to be one of the least volatile of any investment strategy. While the return earned from joint account interest is small, it is consistent. This means that even people who are leery of more aggressive forms of investing are likely to feel comfortable with a savings account of this type, and thus will be motivated to save money.
There are a number of benefits associated with a joint savings account. One has to do with making the process of saving easier. If both parties listed on the account are employed, they may choose to have a portion of their salary or wages direct-deposited into the account. This makes it possible to grow savings without the need for one or both parties to constantly make manual deposits at the bank.
A joint savings account can also be a means of funding a checking account in the event of an emergency. Thanks to the online access that many banks now offer, one of the individuals listed can log into the joint account and initiate a transfer to another account at the same bank instantly. This can be an important money management tool that will prevent overdrafts that could occur when an unexpected situation arises.
In many jurisdictions, having a joint savings account is a practical way to make sure finances are not disrupted when one of the account holders dies. In some areas, assets that are in the name of the deceased are immediately frozen at the time of death, pending distribution of assets according to the terms of a will. When a joint account exists, the assets contained in the account are still readily available to the other individual listed on the account. This means that a surviving spouse, partner, or child will have access to at least some funds while the estate of the deceased is settled.
When considering the possibility of opening a joint savings account with anyone, it is important to understand local laws that will apply, as well as to have a great deal of trust for the other party. Make sure you understand how a joint account transfer is conducted, the nature of any joint account death laws that may apply, and how the joint account interest is calculated. Assuming the terms are agreeable and both partners can work together successfully, the account will prove to be one of the most useful assets that the two individuals can create.
