Joint savings accounts

A joint savings account is just the same as a personal savings account. The only difference is that there’s more than one account holder. Each account holder can put money into the savings account as well as withdraw it.

While current accounts are more for day-to-day spending, savings accounts are typically used for putting your money aside for a later date. The idea is to deposit money in an account and earn interest on it, so the amount in the account should slowly build up.

With a joint savings account, two or more people can save towards a shared financial goal like a deposit for a house, school fees, home renovations and holidays.

Most people who open a joint savings account are couples in a relationship, married or living together. But you could open a joint savings account with anyone you want to save with, whether that’s housemates, friends or family members.

It can depend on your provider but, in most cases, you can open a joint savings account even if you live at different addresses.

Can you have a joint savings account with more than two people?

It depends on the provider. Some will allow more than two people to be named on the account, while others will only allow two account holders to share a joint account.

A joint savings account works in the same way as an individual savings account, except that more than one person has control of the account.

Each joint account holder can deposit and withdraw money, view transactions, and set up direct debits and standing orders. And, typically, all without the agreement of the other account holders.

That’s why it’s so important to think carefully before opening a shared savings account. Make sure you fully trust the person or people you’re entering into this financial agreement with and that you have a shared understanding of what your joint savings account is for.

To apply for a joint savings account, both you and the joint applicant must be a UK resident and have proof of address. You’ll need to be over 16, in some cases over 18, to apply.

Some banks will want at least one of you to have an existing current account, or to open one with them, before they’ll let you open a savings account online or in person.

As with single savings accounts, there are different types of joint savings accounts available. The main ones are:

• Instant access savings account – you can draw money out whenever you need it, which could be handy in an emergency.

• Fixed rate savings account – gives you a fixed interest rate for a certain length of time. Typically, these accounts offer a higher Annual Equivalent Rate, or AER (the interest rate for savings accounts), than instant access accounts. A good option if you don’t need access to your savings for a while.

• Regular savings account – you’ll need to pay a certain amount of money in each month, then interest is usually paid yearly. Regular savings accounts typically offer higher interest rates than instant access and fixed rate accounts. But those with the best interest rates are often only available to existing customers with a current account at the same bank.

• Notice account – these can offer better rates than other types of joint savings accounts. But you need to give notice before you can take money out. This could vary between 30-120 days depending on the provider.

It depends on how much you earn. The personal savings allowance (PSA), introduced in April 2016, means some people won’t pay tax on their savings at all:

• As a basic rate taxpayer, you can earn up to £1,000 in interest without paying tax.

• If you’re a higher-rate taxpayer, you can earn up to £500 in interest, tax-free.

Any interest that you earn over your PSA is charged at your normal tax rate: 20% for basic rate taxpayers and 40% for higher-rate taxpayers. Additional rate taxpayers don’t get a PSA and have to pay 45% tax on the interest they earn from their savings.

When it comes to joint savings accounts, the amount of interest earned will be split equally between all the account holders and counted as part of each person’s PSA. It doesn’t matter if you and the other joint account holder(s) are in different tax brackets; the interest will still be split evenly.

To open a joint savings account, all prospective account holders will need to provide proof of address and ID.

Some banks only offer joint savings accounts if at least one of you already has a current account with them. Others may want you to open an account in a sole name, then add another person once the account is active.

Some banks will let you open a joint savings account online if you already bank with them. However, you’ll usually need to complete your application in person at your local branch or over the phone.

If you and your partner split up and decide to go your separate ways, you’ll probably want to close your joint savings account.

If you both agree to close the account and divide the funds, it should be straightforward. The bank will need an agreement from you both in writing.

If one of you refuses to close the account or you disagree on how the funds should be split, you can ask for the account to be frozen. Neither of you will then be able to touch the money until a solution is found. You’ll either need to come to an agreement yourselves, through mediation or through the courts.

Shared savings accounts can be a convenient way for people to save up together towards a shared financial goal, but there are reasons to be cautious. Here are some things to bear in mind, before you open an account:

Are you on the same page, financially?

A joint savings account is a big financial tie, so you want to be sure you both share the same responsible attitude to money. Remember, if you both have access to the account, either one of you can withdraw funds without having to consult the other person.

It might be possible to set up an arrangement with the bank that requires both of you to authorise any withdrawals. However, not all banks or building societies offer this option.

Do you agree on how to use your shared savings account?

It’s a good idea to set clear expectations about how much you’ll be putting into the savings account and what you’re saving for. If one of you earns considerably more than the other, openly discuss how you’ll handle this to avoid resentment down the line.

To protect the money you earn, you could each put your salary into a separate personal account then transfer a set amount into your joint savings account every month. It’s a good idea to put 20% of your salary into your savings pot.

Do you trust your potential joint account holder?

Ultimately, a joint savings account needs trust and commitment from both of you. If you have any doubts about the way your partner handles money, or your relationship is a little rocky, you might be better having separate accounts.

The first thing you’ll probably consider is the interest you’ll earn – that’s really the main purpose of a savings account. When savings accounts are advertised, the AER is shown. This shows how much you’ll earn from the account over a year. You can use it to compare joint savings accounts.

You’ll also want to consider:

• Access – do you want to be able to take out your money whenever you want or are you happy to leave it for a certain length of time?

• Deposits – some accounts might have restrictions on the maximum or minimum amount you can deposit.

• Withdrawals – some accounts might limit the number of withdrawals you can make each year.

• Eligibility – some banks only offer joint savings accounts to existing or new current account customers.