Interested in signing up for a joint investment account? Find out why MoneyOwl’s Head of Solutions has five!
In MoneyOwl, I am known as the client with the greatest number of joint investment accounts, thanks to having set up one with each of my four children, and one with my husband. Prior to investing with MoneyOwl, I only had rudimentary means of saving up for my children’s tertiary education. I depended mainly on the Child Development Account and dollar-for-dollar Baby Bonus to build up their education funds, together with never having touched their Edusave savings. You can read more about how this works in this article.
Joint account with children
However, at the beginning of 2020, I started to seriously calculate how much it would cost to put each of my four children, aged 7 to 16 through university. It was then that I realised that I would need to be more structured in my approach to save and invest for each of them. At the same time, I also wanted my children to be part of this journey with me. I believe that financial savviness is an important life lesson that I can impart to each of them, so that no matter how well they do in their career in the future or not, they would always have the essential skills needed to manage their finances and come out alright.
As such, I decided to open a joint investment account with each of them. As they are all below the age of 18 years old, which is the minimum age to invest with MoneyOwl, I retain the main ownership of the account with the rights to make decisions on buy and sell transactions. I also renamed each of the joint account – a neat feature that allows me to personalise the investment further, in my child’s name as well as what they aspire to do when they grow up. For example, for my eldest, I called it his “Game Design Fund”, and for my second child who loves art, I called it her “Animation Studio Fund”. They love it!
I also decided to invest instead of getting an insurance endowment plan because I felt that it was easier for me to explain to them how investing works, as they would be able to see how their savings grow and change in value every day. Yes, I “forced” them to put at least $50 of their savings into the joint account to keep them vested, and only after explaining to them what they would be investing in.
Some things I share with them include the companies they will be investing in – from familiar companies like Apple and Facebook to many other smaller companies that have yet to be discovered. I tell them that when those companies do well, they would earn a small portion of their profits. Of course, I also added that not every company will be profitable, and some will eventually go bankrupt. To prevent this from causing them to lose all their savings, I told them it was therefore important to invest their money not just in one company but to diversify across thousands of companies.
When my eldest comes of age, I would be able to gradually give him access to the joint account to make his own informed decisions with these investments. As he started working during his holidays last year, I have also encouraged him to put a portion of his pay into the joint account. With this approach, I hope my children will develop the right perspective towards delayed gratification and investing. What I like about investing is also the flexibility over the use of these monies. Supposedly he does well for his school leaving examinations, which will entitle him to a bursary award or scholarship, he will not need to tap on these funds, and we can continue it grow.
Joint account with spouse
The reason I set up a joint investment account with my husband is because his willingness to take risks is rather low. He is afraid that he would lose money in his investments but that is mainly driven by his own lack of understanding of how the markets work. I have been encouraging him to set up a personal investment account for the longest time, but he was hesitant to get started. Finally, I suggested that we open a joint investment account for our retirement. I called the joint account “Growing Old Together with You”.
Both of us invested an equal amount of funds to kickstart the account. He was much less resistant than I expected to set up the joint account. I guess what he needed was someone who knew about investments to come alongside with him. In the initial few months of investing, he logged into his account almost daily and would irritate me with his incessant questions about why certain prices were going up or down. Over time, he began to realise that looking at his investments every day was in fact counter-intuitive and very stressful. Now, he logs in only once a month and surprises himself that his money is making money.
For our retirement planning, we decided to invest in WiseIncome instead of Dimensional because I like that WiseIncome pays out dividends on a quarterly basis. While we do not need the passive income now, the concept of being able to get something out of our investments on a regular basis adds a dimension of tangibility to our investments. For my husband who is new to investing, it gives him greater security.
Another perk about setting up a joint account with my spouse (other than giving me indirect access to his assets, shhh…) is that should anything happen to either of us, our access to each other’s assets is not frozen. This is because estate planning rules in Singapore dictate that only with a grant of probate or letter of administration would the executor have access to the deceased’s financial assets. This process could take as long as a few weeks to several months. In the meantime, the next-of-kin will not be able to access the monies.
A joint investment account mitigates some of these restrictions because upon the demise of one of the account holders, the ownership of the asset vests with the surviving account holder. It is also because of this useful feature of joint accounts that some elderly parents open a joint investment account with their adult children or grandchildren as a form of legacy planning. This is also to prepare for scenarios where they start to lose their mental faculties due to age or illness; their children/grandchildren who is a joint account holder can still manage those investments, and subsequently inherit the wealth seamlessly.
Having said this, a joint investment account may not be suitable for everyone. You must make sure that both parties involved understand the unspoken rules of mutual trust and accountability when it comes to managing the funds within. This risk is slightly mitigated through notifications that are sent to both parties whenever there is any transaction made to the account. For me, because I am more financially savvy than my spouse or children, I’m confident that this is something I won’t have to worry about until my children come of age. However, it’s always important to maintain open channels of communication and ensure both parties are on the same page when it comes to the joint account.
For more information on joint investment accounts, reach out to our Client Advisers today!