Let’s be clear on one thing: When it comes to planning your personal finance matters as a couple, there is no one right solution for everyone.
As adults, most of us have many financial responsibilities in life that we have to care for. Some of us may have to personally support our elderly parents as a single child while our spouse may not need. What works for couple friends of ours may not necessarily be the best solution for ourselves. Hence, every couple will have to figure out what’s the best way for themselves.
One of the ways shared financial expenses and goals can be accounted for as a couple would be through a joint savings account. A joint savings account is like a regular savings accounts – with the only notable difference being that it’s held under two persons name.
This means both you and your joint account holder (for this article we are going to presume this is your spouse) will have equal claim over the savings in this account. Both of you can legally withdraw funds from this account and use it in the way you deem fit, without needing to seek approval from the other person.
Why Would Couples Want To Open A Joint Savings Account?
Friends that you speak to or articles that you read will suggest that a joint savings account is important if you would like to take your relationship to the next stage.
However, for this article, we will go one step further in exploring what are the actual reasons why you would want to open a joint savings account with your spouse, or if you even need one in the first place, beyond just wanting to demonstrate your commitment in the relationship.
# 1 Shared Household Expenses
When you live together, you will find yourself incurring many shared expenses as a couple or as a family. These include utility bills, telecommunication bills, conservancy charges, grocery expenses, transport cost and monthly home mortgage repayments.
A joint savings account can be used to pay for these shared household expenses. The couple can then contribute equally, or a proportion that they agree on, to the savings account which will be used to pay for shared household expenses.
# 2 Savings Goals
The other way a joint savings account is useful, is for couples to save up towards financial goals that they have set for themselves.
For example, if a couple intends to upgrade their home in five years, they may wish to start setting aside some money each month in their joint savings account to work towards this goal. They could also make saving up for an early retirement their priority and save diligently towards it.
Similar to why we think it’s important to have multiple savings accounts, you should also have in mind the reasons why you would want a joint savings account with your spouse. Do you need this account to pay for shared household expenses? Or are you using it to save up towards financial goals that both of you have decided on?
This is an important question to ask yourself because the reason for it would determine whether 1) you and your spouse really need to open a joint savings account legally, or 2) whether you are better off designating one of your own personal savings accounts as your de facto joint savings account.
Using Your Personal Savings Account As A De Facto Joint Savings Account
There are a couple of reasons why you might be better off designating one of your personal savings account as your de facto joint savings account.
No good joint savings account: The first reason to use a personal savings account, instead of legally opening a joint savings account, is that there are very few good joint savings accounts in Singapore for you to choose from. This is in contrast to personal savings account, where there are many good ones to choose from such as the OCBC 360, UOB One Account and the DBS Multiplier.
For example, if your intention is to use the joint savings account to pay for household bills, you would be better off using a personal savings account that earns you bonus interest on your savings if you were to pay bills via GIRO using the account (e.g. UOB One Account).
Higher interest: Most joint savings account in Singapore give a measly interest of 0.05% per annum, which is hardly a smart way for you to be growing your savings. On the flipside, there are many personal high-interest savings accounts that earns you much higher interest rates. While some of these accounts would need you to hit minimum requirements each month, you can also consider savings accounts that gives you a decent interest without having to jump through any hoops.
Why You May Want To Legally Open A Joint Savings Account With Your Spouse
While we have highlighted some of the reasons why you may want to designate a personal savings account as your de facto joint savings account, there are also good reasons why you may wish to legally open a joint savings account with your spouse.
Right of survivorship applies: What this means is that in the event that a joint account holder passes on, the savings in the joint-account automatically belongs to the surviving account holder. This is good because if a joint savings account is meant for shared household expenses, you would, as the surviving spouse, be able to continue using the savings in this account to pay for household expenses.
In contrast, if your personal savings account is acting as your de facto joint savings account, what it means is that your spouse will not have full claim to the savings in the account in the event that you pass on based on the intestate succession act. This means the account will be frozen until an executor is appointed and distributes the savings in the account.
Editor’s Note: A DollarsAndSense reader shared with us that while the right of survivorship may apply for joint savings account holders, this is not always the case. Joint savings account holders should double check with the banks they intend to open a joint account with to confirm if the right of survivorship applies in the event that one account holder passes on.
Saving towards shared financial goals, or otherwise: Your spouse and you may have plans to work towards early retirement, or other shared financial goals that you both have. In the event that one of you passes on, the funds in your joint savings account will automatically belong to the other person, instead of it being disbursed to other family members such as your parents or children.
But what if the relationship doesn’t work out?
If that happens, a joint savings account would also mean that both of you have equal claims to the savings in the joint-account. However, if your “joint savings account” is a personal savings account held under your spouse’s name, this means that the savings legally belongs to him/her only, unless you can prove otherwise that it’s a matrimonial asset.
If You Choose To Get A Joint Savings Account, Make Sure You Get One That Gives You Decent Interest
Most joint savings account in Singapore gives an interest of only 0.05% per annum. This may not matter much if your joint savings account is typically used to pay for shared household expenses and wouldn’t have much savings left at the end of each month.
However, if you and your spouse are saving up towards upgrading a home and already have $200,000 in your joint savings account. At 0.05% per annum, you would earn only $100 per year in interest. This is not good enough.
Instead, you should choose a joint savings account that allows you to earn decent interest. One example will be the CIMB FastSaver Account, which gives you 1.00% on your first $50,000 in savings, 1.50% on savings between $50,000 to $75,000 and 0.60% on any amount above $75,000. This means that if you keep $200,000 in savings in a joint CIMB FastSaver Account, you will earn $1,625 in interest each year.
So choose your joint savings account wisely if you and your spouse would like to save a large sum of money together.