Joint accounts are typically used by couples or family members who want to manage their finances together. You probably know them in the form of joint bank accounts, where all parties on the account have equal access to the savings to make deposits and withdrawals.

There is also the lesser known joint investment account, which is a brokerage account that allows account holders to pool funds together to create a shared investment portfolio. 

In both cases, combining finances can make it more convenient for both parties to manage, but at the same time, requires a degree of financial compatibility. It is best to approach the decision with regular and transparent communication about expectations, responsibilities, and financial goals. 

Pros and cons of joint bank accounts

Given that joint bank accounts are a shared responsibility, it's important to consider the implications. There should be mutual understanding of financial habits, attitudes and goals by having an honest conversation (or multiple of them). Then, agree on a budget as well as a spending plan with all parties involved, as well as to consider any tax or legal issues that may come along with it.

Pros:

• Simplify budgeting: A joint bank account is a central pool of funds for shared costs like rent, groceries, and household bills, eliminating the need to split bills.
• Access to perks: Pooling funds can help you meet the minimum balance requirements for higher-interest savings accounts. Some banks also offer credit cards linked to joint bank accounts, allowing you to accumulate rewards and perks more quickly through your combined spending.
• Encourages accountability: Joint bank accounts provide the transparency of both parties’ contribution towards shared financial goals, and encourages both to be more responsible with their finances. 

Cons:

• Loss of privacy: Both partners have access to all transactions made on the joint account. This can result in a loss of privacy, and can cause tension if one partner disagrees with the other’s spending habits or feels like the other person is not respecting their privacy.
• Potential for disputes: Disagreements can emerge from misalignments in spending habits and money attitudes, which can make it challenging to agree on joint financial decisions. 
• Complex legal processes to resolve conflicts: When conflicts are unreconcilable, ownership of the joint account can be complex and may require legal intervention to sort out.
• Credit history impact: All account holders are responsible for any debts or overdrafts on the account, no matter who incurred it. The account’s credit history will affect both partners nevertheless.

How to open a joint bank account

Opening a joint bank account with major banks like DBS, OCBC, or UOB is a straightforward process and can often be completed online using Singpass.

There are two types of joint accounts: joint-alternate and joint-all accounts. A joint-alternate account (or “joint-or”) permits each party to access and use the funds independently, while a joint-all (or “joint-and”) account necessitates approval from both parties for any transactions. This may be a safer option, but can be troublesome especially in times of emergency.

You should discuss the preferred type with the other joint account holder, ensuring both of you are aware of the rights and access.

Why you should consider a joint investment account

While joint bank accounts make it easy for both parties to save together, they often come with requirements such as minimum balances, salary crediting or minimum spending on credit cards to maintain a certain level of benefits. 

Besides, while they offer liquidity and transactional ease, interest earned on these accounts can be quite minimal when interest rates are low and fail to keep pace with inflation.

An alternative is a joint investment account, where account holders pool their resources to invest in a portfolio of assets such as money market funds, stocks, and bonds. They can potentially deliver higher returns compared to savings accounts, while still maintaining the benefits of shared financial management.

Like opening a joint bank account, financial compatibility in joint investing is just as important. Ensure you and the other account holder have a mutual understanding on these factors:

• Risk tolerance: Everyone has a different comfort level with risk, which will be put to the test when markets are volatile or in a downturn. Agree on an investment strategy that works for both of you.
• Time horizon and goals: Are the both of you investing for the long-term, or do you have shorter-term goals in mind? Aligning on your investment horizon and objectives will help you choose the right portfolio and stay on track.
• Contributions and withdrawals: Decide how much each person will contribute to the account and establish clear guidelines for making withdrawals.
• Account closure: How should the assets be split should both parties decide to close the joint account? 

How to open a joint investment account with Endowus

You can set up a joint investment account on Endowus. Both account holders must be at least 18 years old. We have had clients who want to set up joint accounts with their children to familiarise them with investing, and couples who want to start financial planning together and making decisions as a family.

Endowus joint accounts are "joint-alternate", meaning either account holder can access and manage the account independently. 

Here’s an overview of how to open a joint account on Endowus:

1. Decide on a Primary and Secondary Account Holder. 
2. There are different steps depending on whether either of you already have an Endowus account—refer to our FAQ page for more details.
3. Complete and upload the Joint Alternate Account Authorisation letter, and you are all set.

What happens to the joint account when one party passes on?

In the event of one account holder's death, the other account holder maintains full access to and control of the joint account. This avoids the need for a Grant of Probate or Letters of Administration, which can be a time-consuming and costly legal process. The seamless transfer of assets provides financial stability and reduces the administrative burden on the surviving family members during a period of grief.

Honest conversations and common financial goals

In conclusion, setting up a joint account can be a good idea for couples and family members who have a strong, transparent relationship and are committed to working together on their finances.

But beware of the pitfalls—start a joint account only if your relationship with your spouse, partner, parent or child is anchored on open communication, and if you are both confident that tackling money matters together will bring you closer, and not farther apart.

And regardless of whether you have a joint account together, it’s important to set and agree on common financial goals and plans, such as buying your dream home, building your children’s education fund, and what type of lifestyle you want in retirement.

Feel free to reach out to our MAS-licensed client advisors if you have questions about joint accounts and financial planning. Ready to start your investment journey together? Create an Endowus account today.