A major decision, which intending or married couples are usually faced with, is how to manage their finances.
Before a couple takes the decision to have a joint account, it is advisable for them to have proper knowledge of its benefits and associated risks.
One of the reasons why couples keep joint accounts is the mutual security and reassurance that they have without doubting each other. A couple with high trust for each other and who have similar spending and saving habits may be more comfortable keeping a joint account than those in which one partner is a good saver and the other a heavy spender.
A joint account enables a couple to plan their budget, spend and invest their funds together.
However, partners can sometimes feel trapped with their spending if they have to get permission from each other before they can access the money.
In the event of death of one partner, the other automatically gets the money in the account without having to go through the tedious process of getting a letter of administration.
However, if the relationship turns sour and they separate or divorce, having a joint account may end up as one of the most stupid decisions they ever made.
Either of the couple can clear the entire money in the account even if he/she was not the one that deposited the funds there.
Even if a partner decides to take legal action to get the money back, this may take a long and stressful process without any assurance of winning the case.
www.nbc.ca gives more tips on the benefits and risks associated with having a joint account.
What is a joint account?
A joint account is a bank account opened in the names of two (or more) individuals. There are various reasons for opening a joint account. The most common is certainly to make it easier for a couple to manage their finances, especially when they need to pay shared expenses.
All those holding the joint account have the same rights when it comes to withdrawals, deposits and any other banking transactions allowed in the account. As a result, each account holder can do transactions without first obtaining the other account holder’s permission, unless the account has been specifically set up to require this consent.
The risks
Since both account holders own the joint account, each person can manage the account at his or her discretion without the consent of the other account holder. For instance, any of them can withdraw funds or even close the account.
Banks will accept the instructions of either account holder because both of them are authorised to act alone, even though the account is jointly held (unless otherwise indicated).
The account holders are jointly responsible for all of the instructions received by the bank relating to the joint account and for the commitments made by each account holder relative to the joint account.
If the couple decide to separate or divorce, the funds in the joint account may be considered marital property.
If the bank receives a garnishing order (seizure by garnishment), the joint account could be frozen, or in some provinces garnished, preventing the account holders from accessing the funds.
The funds deposited in the account may be subject to the rights of the creditors of either account holder (for example, in the case of bankruptcy or insolvency) and may also be subject to claims made against either of the account holders.
To open a joint account
*You need to understand the risks and advantages of a joint account.
*Do you understand how it works?
*Do you understand your obligations under a joint account?
*Since your account co-holder has the same rights as you with respect to the joint account, do you understand that your partner can use the funds in the account even if you deposited the money?
Is your joint account co-holder trustworthy?
*Has that person always been honest with you?
*Do you know the person well enough or have you known each other long enough to trust him or her?
*Is the person likely to act in your interest?
*Does the person have personal problems that could prevent him/her from managing your joint finances properly?
*How much control will you have over the funds in the account?
*Have you asked your bank if there are ways to retain some control over the transactions done in the account?
*Are you in a position to regularly check the account statements in order to know about any irregularities?
In the event of an account holder’s death
*The account will be subject to a right of survivorship. This means that in the event of death of one account holder, the surviving account holder retains all of his or her rights relative to the use of the joint account, including any remaining balance.
*Ask your financial institution or legal advisor to explain what will happen to your joint account property if one of the account holders dies or becomes legally incapacitated.
*Consider including information about your joint account in your will so that your wishes will be clear.
Getting your bank to waive account fees
These days, people complain about some bank charges and deductions from their accounts. Indeed some banks are known to charge all manner of fees on services they render; but finance experts say it is pretty easy to get some of these bank fees waived.
An online report on the issue by bankingadvice.com notes that some of the fees being charged by banks may be due to a mistake you have made (such as allowing your account to become overdrawn). Sometimes, the fees are imposed by the bank simply as account maintenance fees.
Here are some tips that will make your bank to waive those fees, according to bankingadvice.com.
Ask them to waive the fee: Simply call your bank and ask them to waive the fee. Or, visit the bank in person and ask to speak to an account representative. Simply taking this extra step can sometimes make the difference in being able to get a waiver of the fee.
Part of this discussion will hinge on whether you are asking your bank to waive a one-time late fee or single transaction fee, or whether you are looking not to pay a monthly or periodic account maintenance fee. Your bank will almost certainly be more likely to waive a one-time charge.
Ask for your account to be ‘grandfathered’. If you are looking for some relief from ongoing account fees because of a change in the terms applicable to your account, then ask whether you can have your account terms ‘grandfathered’ – which means that the prior terms will continue to apply, even though new accounts of the same type will be subject to the less favourable terms.
Switch to a new account. If your bank is not able to waive the account fees at issue, then ask whether they have a different account type that can provide you with the services and features you are looking for, but on a better fee schedule.
For example, maybe you opened a free current account a number of years ago with a relatively low balance requirement, and your bank is changing the fees applicable to those accounts. But now, your account balance may be much higher, so you will be eligible for a higher level of account (with a higher minimum balance requirement) that gets you the terms you are looking for.
How your savings account works
A savings account is opened in a bank by a salary earner or a person who has a regular source of income in order to have interest on his/her money. This facility is also available to students, senior citizens and so on, to encourage a savings habit. Saving accounts are opened to encourage people to save.
These are some reasons for opening savings bank account, according to www.itsallaboutmoney.com.
A savings account encourages savings habit among salary earners as well as those who have a fixed income.
The depositor earns income through the savings bank interest.
A bank account allows depositors to make payments by issuing cheques.
It shows and keeps a record of the income earned by the account holder during the year.
The account holder can use the saving account passbook/ statement as an identity and residential proof.
You can use a savings account to make electronic fund transfers to another account.
A savings account also allows internet banking and online purchases and shopping.
A savings account keeps a track of all the online transactions of the account holder.
It allows immediate access to the account holder’s money with the help of an Automated Teller Machine.
Banks also offer a variety of services to the account holders including ease of getting loans if you already have an account with the bank.
Your reasons for starting a savings account might be completely different. But no matter why you decide to save your money, choosing to open a savings account is a much better, and safer, option than just putting your money in a shoe box under your bed or in a safe in your bedroom.
The savings account holder is allowed to withdraw money from the account as and when required.
And you may not realise it, but if you have a basic savings account, you are doing a little bit of investing. With a savings account, you are putting money into the bank and receiving some interest. The interest, which is given on a savings account, is attractive though often nominal.
For the most part, you won’t earn extra money, but your investment is safe, and you can get your money quickly and easily.
