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If you're looking for an easy way to manage money with someone, you might consider opening a joint bank account.
Although they're an obvious choice for couples, joint bank accounts aren't just for people in committed relationships. They can help parents teach kids money management skills and adult children assist aging parents with their finances. Students might open a joint account with their roommates or friends might even use one to save for a vacation.
Read on to learn how joint accounts work, what the potential risks are and how to navigate the process of setting up a shared bank account.
A joint bank account is a chequing or savings account shared by two or more people. These account holders don’t need the other joint account holder’s permission to use the account, making it simple to manage shared money.1
If you're a joint account holder, you have access to all funds held in the joint bank account. Depending on how you set up the account (and whether you need all account holders’ sign-offs for certain transactions or just one of the account holders to sign off), you may also make:
- Deposits, including direct deposits
- Withdrawals, including e-transfers1
Just like with other accounts, you can access a joint account with a debit card and through online banking.
There are many benefits of opening a joint account with another person. A joint account gives both account holders full visibility and control of the funds to take care of shared financial responsibilities. They can help people in different types of relationships manage financial situations. For example:
Married or unmarried couples often share finances and with a joint bank account, they can manage their money together. They might also jointly save for retirement, meet shared financial goals and track household spending habits.
Roommates can set up a joint chequing account for everyday banking and to pay shared expenses.
Parents of teenagers or young adults can use joint accounts as “training wheels” while they're teaching their kids about budgeting, saving, spending limits and what constitutes a spending emergency.
Those with aging parents can more easily assist with finances, while still helping their parents to maintain independence. They can monitor account activity for any unusual spending or fraudulent account activity and also pay bills when needed.
Siblings who share a family cottage or other real estate could use a joint bank account to manage related expenses like insurance and bill payments. Beforehand, detail who's allowed to access the money and for what, and whether approval is needed for all expenditures or only certain ones.
Friends saving for a vacation or another goal together can sign on to a single joint savings account, simplifying deposits.
If you have any sort of shared financial relationship with someone else, a joint bank account could help make this part of your life simpler. With a joint account, all account holders can easily track account activity and manage funds together.
Whether you’re opening an account with a partner, family member or friend, it’s essential to lay down ground rules. Though conversations around money can be complicated, it’s important to be open and transparent from the start to set yourselves up for success.
Before opening a joint account, sit down and answer these questions together:
- What is the account for? Discuss whether the money is for shared expenses or savings — or both.
- Which types of spending need prior approval? Is each account holder free to take out any money they want, or do you agree to discuss withdrawals over a certain amount beforehand?
- Is there a budget for “fun money,” and if so, how often and how much? Be clear about whether account holders can use the money on whatever they please.
- Which bills (or other expenses) get paid out of the account, and who's responsible for paying on time? Using a joint bank account for shared bills works really well as long as someone is responsible for making payments. Otherwise, you may miss payments, which can negatively affect your credit score.
- How do we keep track of money in the account? Consider setting up automatic bank alerts, if available, so each person can track funds independently.
- How will we save for shared financial goals, such as a vacation? Will all account holders put in the same amount and on the same schedule? Is it acceptable for one party to pay more?
- How do we tackle debt? Discuss whether the money may be used for debt, and if so, whether it’s for joint debt only, such as mortgage payments, or also for high interest individual debt like credit cards.
- What happens to the money when you want to close the account? Make a plan for how funds will be distributed if you decide to close the account.
When you have a joint bank account, you enter into a financial arrangement with the other account holder. Legally, you share any money in the account and can both take it out, at any time.2 Here are some potential pitfalls to consider:
- Shared access to funds: You need to be able to trust the other person and how they will use the money. Every account holder has full access to the funds in the account and can make withdrawals.2
- Privacy concerns: Any banking activity on a joint account is visible to all account holders.
- Closing a joint account: The process of closing a joint account is typically straightforward, although all joint account holders usually have to authorize the closure. Once closed, any money in the account can be evenly split. But problems may arise if the account holders are separating on bad terms or if there's a dispute.
In order to open a joint bank account in-person at a branch near you, you and your co-applicant will need the following:
- One piece of government-issued photo identification, like a driver’s license or a passport, or two documents verifying your identity, like your birth certificate and a utility bill
- Documents from two independent reliable sources from the list of Acceptable Dual Process Documents/Identification, such as Canada Pension Plan, original birth certificate or a Canadian home/life/car insurance document.
Here’s the full list of acceptable documents and alternative requirements at Scotiabank for newcomers or individuals under 15 who are applying.
To open a joint bank account, it is the same form used as an individual bank account, but you would fill out the joint applicant information alongside the applicant information.
There are significant legalities you should consider when opening up a bank account with another person. Most importantly, you need to choose a joint account holder of the account that you trust since they’ll have full access and authority to the shared funds.
For couples or individuals that need to share some, but not all, financial responsibilities, a joint account can be used selectively as a second account. This allows each individual to protect themselves financially and keep some autonomy because they can have their paycheques deposited into a sole bank account and then deposit funds to a joint account to maintain shared bills and responsibilities.
In the case of one account holder passing away, the funds will typically still be available to the surviving account holder.3 However, this can be challenged if the deceased's funds are tied to an inheritance (for example, if an older parent had a joint account with one of their children). Similarly, in Quebec, joint accounts are frozen upon the death of an account holder.
Because the legal and tax implications can vary based on different factors, including the account’s ownership, survivorship rights and which province you live in, consider talking with your legal and/tax advisor before you set up a joint account. You can find more information about joint accounts and the potential risks around them, particularly for seniors considering them, on the Government of Canada website.
One reason some seniors add their children to a shared account is to make it easy to transfer the funds upon their death. However, there are other options to consider, such as a power of attorney (POA).
When you give someone power of attorney, you give them the authority to manage your money and property. In other words, unless you limit them in some way, they can do almost everything you can.
A main perk of a POA is the ability to set limits and conditions. With a joint bank account, all account holders have the same access to the funds, which could leave you vulnerable. A person who has the power of attorney, on the other hand, can be held accountable for their actions.
Whichever estate planning tools you choose, governing laws or rules depend to some degree on your home province or territory. Consider speaking with a lawyer, estate planner or Scotiabank advisor to find out the best option for you.
You can find more information about powers of attorney, joint accounts and the potential risks for seniors, on the Government of Canada website.
Opening a joint bank account with someone you trust can save a lot of headaches when it comes to shared money chores — but choose your other account holders wisely. At the end of the day, a joint account is a powerful tool for strong partnerships. If everyone is clear on your shared goals and expectations, it can make money management simpler.
Don't forget that you can take a hybrid approach to banking by sharing a joint account for certain expenses, while still having an individual account for personal spending. You’ll want to find whatever the best option is for you. Come in to talk to a Scotiabank advisor to discuss if a joint bank account works best for your needs.
This article is provided for information purposes only. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. All third party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific financial, investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
1. This is unless a joint bank account’s signing authority is set up as “all to sign” where all joint account holders’ authorization is necessary for certain transactions.
2. This depends on how the signing authority is set up.
3. This depends on how the signing authority is set up and the jurisdiction where you reside.
