System test Database user management
I would recommend the following approach: 

a) Each developer has their own database that they can work with, try out different things,  destroy and restore at will independent of the other team members. 

b) Have a shared database instance for integration testing so that the whole team can see the shared progress at any one time

c) Use windows authentication to speed up the connection process, and the devs do not have to remember new passwords, and easier to track and audit

Of course all this depends on the size of the database and what resources are available on the test server.