A Simple Guide To Joint Accounts

What is a Joint Account?

A joint bank account is a type of bank account that is shared between two or more people.

It has all the personal account features, like making payments, withdrawing funds, making deposits, and earning interest. 

Each user holds an equal ownership right to the account and can conduct transactions at their discretion.

No one owner has absolute control over a joint bank account, nor has the exclusive right to authorize transactions. 

Joint bank accounts are used routinely by married/common-law couples, families, and business partners.

Benefits of Joint Accounts

  • Pooled savings – Couples or family members can pool their money to save for a common goal, pay down debts, or share expenses. Access to a greater pool of funds can open up greater financial planning options.
  • Income sharing – Suppose you have a family member that earns little income currently due to a job loss. In that case, you can share your income with them, helping them cover their bill payments until they become employed again. Income sharing is especially beneficial when one account holder incurs a considerable, unexpected expense – they can rely on the cash provided by the other account holders rather than apply for an expensive loan. 
  • Encourages financial discipline – If you have children, you know how vital it is to instill responsible financial habits. A joint account can be a valuable tool in helping them learn about budgeting and other prudent money management practices.
  • Convenient income and expense tracking – A joint bank account can greatly simplify tracking income and expenses since each transaction appears on a single monthly statement.
  • Accelerated savings – With two or more people contributing to a joint savings account, you can save and invest together, potentially earning more on your investments than if you tucked money away on your own. 
  • More rewards points – Certain bank accounts allow you to earn rewards points on your spending. Naturally, with multiple users making purchases using the account, rewards points accumulate faster.
Couple looking at their joint bank account

Did you know?

The Canadian Deposit Insurance Corporation (CDIC) treats joint bank accounts as a distinct category from personal bank accounts, which means you and your co-owners have deposit insurance coverage for a maximum of $100,000 on top of the funds insured in any personal accounts.

Drawbacks of Joint Accounts

  • Strained relationships – Though all joint account owners have equal rights, fierce disagreements can arise regarding spending limits, permitted transaction types, and priority access to the funds. These conflicts can cause a rift in familial and business relationships.
  • Dependence – One account owner may shirk their financial duties by contributing less toward bill payments or not holding steady employment to help fund the account. They may become over-reliant on the other account owner(s) to replenish the joint account with cash continually, thus subsidizing their lifestyle and spending habits.
  • Shared liability – In the same way that your share all the benefits of a joint bank account with your co-owners, you also share the risks and liabilities. For example, if the account becomes overdrawn, everyone is collectively responsible for the overdraft fees. The same applies to stolen funds. Suppose the bank can prove one account holder was grossly careless in protecting their PIN or debit card. In that case, they may try to withhold reimbursement for the stolen money.
  • Risk of theft – No matter how much you trust your fellow joint account co-owners, it’s possible that they can drain the account and disappear with the money. 
  • Legal complications – Assessing ownership rights to the money held within a joint bank account (and how much each is entitled to) can become stressful in the event of a divorce or separation. These legal disputes can be costly and take time to resolve.

Setting Up Your Joint Account

The process of setting up a joint bank account with one or more individuals is straightforward.

The joint bank account application form is identical to the one used for a single individual, except you and your co-applicants need to fill it out and sign it together.

Each applicant must supply the necessary details and supporting documents to the financial institution chosen to set up the account.

These typically include:

  • Personal information, such as a social insurance number (SIN), date of birth, and current address 
  • At least one piece of government-issued identification, like a driver’s license or passport.

Joint accounts can be set up as AND/OR relationships.

If it is set up as an AND relationship, both individuals have to be present to access funds.

If it is set up as an OR relationship, either individual can access funds on their own.

Key insight

The right of survivorship applies to joint bank accounts, which means that if one owner passes away, the other retains complete control over the account. However, in Quebec, the account is frozen upon an account holder’s death and becomes part of their estate.

Chequing vs Savings Account: Does It Matter?

While both a chequing account and a savings account can perform the same functions, their purposes differ.

A chequing account is typically used for everyday transactions.

In contrast, a savings account acts to store your money away for the future or for a specified purpose such as a vacation fund.

It’s crucial to discuss what type of joint bank account will best suit everyone’s goal.

If one person wants to spend freely while another wants to save, it won’t work.

There should be an explicit agreement as to the intended use of the account to prevent financial issues from emerging.

Frequently Asked Questions

  • Is a joint account a good idea?
  • Can I get an ATM card for a joint account?

Mark is a freelance writer who specializes in writing content for firms in the financial services industry, including fintech. He has written for brands like Loans Canada, LowestRates, and The Motley Fool, covering topics related to investing, mortgages, credit cards, and many others.

He is passionate about educating people on how the financial markets work and providing tips to help them better manage their money. Mark holds a bachelor’s degree in finance from the Northern Alberta Institute of Technology and has more than a decade of experience as an accountant.

Outside of writing and finance, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.