How To Open A Savings Account For A Child | Bankrate (2024)

Opening a savings account for your child can provide a safe place for their money, allow the funds to earn some interest — all while teaching them about banking and money management.

When setting up an account for a child, parents can choose between a custodial account or a savings account designed for kids. Many financial institutions offer both options, making it relatively simple to find one that’s right for your family.

Types of kids’ bank accounts

The main difference between a custodial account and a kids’ savings account is the way the two types of accounts are structured.

Custodial accounts

A custodial account is an account that parents can set up and manage on their minor child’s behalf, and the child is able to take over the account upon becoming a legal adult. Once a custodial account has been established, any adult can contribute to it — and once a deposit has been made to an account, it can’t be revoked. Custodial accounts come in two varieties, with their main difference being the types of assets they can hold.

  • Uniform Gifts to Minors Act (UGMA) accounts: UGMA accounts can hold financial assets such as cash, securities, annuities and insurance policies. These accounts can be opened in all 50 states.
  • Uniform Transfers to Minors Act (UTMA) accounts: UTMA accounts are more flexible than UGMA accounts, in that they can hold any type of property, whether it’s tangible or intangible, including real estate, artwork, royalties and patents. Transfers to these accounts are also permitted through inheritance. These accounts can be opened in every state but South Carolina and Vermont.

Unlike a savings account, a custodial account can hold more than just cash. Your ability to include investments provides the potential for larger long-term gains than a savings account. A downside of custodial accounts is that since the assets are owned by a minor, it could impact the ability of the child to get federal financial aid for college.

Both brick-and-mortar and online-only banks may offer UGMA or UTMA accounts, though the annual percentage yield (APY) may be substantially higher with an online bank.

Savings accounts for kids

An alternative to a custodial account is a savings account that’s designed for children under age 18, and there is joint ownership between the parent and child. The best savings accounts for kids may come with perks such as apps with educational content and parental controls, birthday bucks for kids and debit cards for teenagers.

Look for a children’s savings account with no maintenance fees, no minimum balance requirement and a comparatively high annual percentage yield (APY).

What happens when the child turns 18 years old can vary from bank to bank. The account may be converted to an adult savings account, or it may remain jointly held until the owners decide to make changes.

There are many benefits of opening a savings account for a child, such as:

  • Helping them learn to plan ahead, as well as stay focused on goals and priorities.
  • Teaching them to save for the things they want until they can afford it.
  • Showing how their money can grow, thanks to compound interest.
  • Giving kids hands-on experience with banking online as well as at a branch.

Learning financial responsibility takes time, so don’t give your child more than he or she is ready to handle. Remember that a joint savings account gives your child access to the money, so some parents may want to choose an account that provides parental controls.

How to open a savings account for a child

In some ways, opening a savings account for a child is very similar to opening one for an adult. Tips to consider when shopping for a savings account for your child include:

1. Open a savings account, not a checking account

Checking accounts are for spending money whereas you’re likely trying to teach your child how to save. It’s advisable to wait until your son or daughter is a teenager or has a job before allowing them full access to a checking account.

You may need to supply some identification documents for your child during the account opening process, such as a social security card or birth certificate.

2. Bank at the branch and online

With your help, your child can sign on to the bank’s website or use its app to learn about managing their account from a smartphone or computer. They can check the account balance, transaction history and interest earned.

Your child may be tech-savvy enough to do basic banking functions online, but it can also be helpful for them to learn proper banking etiquette at a brick-and-mortar branch. When kids receive money for a birthday or doing chores, they may enjoy visiting a branch to hand the money to the teller and receive a paper deposit receipt.

3. Find a bank that promotes financial education

Some banks make saving fun and teach kids good money habits through offerings like mobile app features, online tutorials and birthday bonuses. Ask a banker and check the bank’s website to see what resources they provide for young people.

The website of the Consumer Financial Protection Bureau, a financial regulatory and education agency, is also a good place to find information on teaching your child about money matters.

Best banks for kids’ accounts

Alliant Credit Union

  • Eligible age range: Kids up to 12 years old
  • Availability: The Kids Savings Account is available nationwide to families who are members of Alliant. Membership is open to those who work for an employer linked to Alliant, as well as to anyone who pays a $5 membership fee that is donated to Foster Care to Success.
  • Kid-friendly features: Alliant has educational content on its site and encourages children to use the Alliant Mobile Banking App to learn about banking firsthand.

Bank of America

  • Eligible age range: Parents can open an Advantage Savings account as a joint account, including a minor child as a co-owner. Monthly maintenance fees are waived on the account until the child reaches the age of 18.
  • Availability: For a minor child to get a savings account at Bank of America, you and your child need to own the standard savings account jointly.
  • Kid-friendly features: Bank of America’s site has educational content teaching children about money.

Bethpage Federal Credit Union

  • Eligible age range: Up to 20 years of age
  • Availability: The Youth Savings custodial account is only available to New York residents.
  • Kid-friendly features: Bethpage offers free interactive learning tutorials through its My Money 101 financial education program.

Capital One

  • Eligible age range: Up to 18 years of age
  • Availability: An adult must own the account jointly with the child. If the child is under the age of 12, the adult needs to be the parent or legal guardian.
  • Kid-friendly features: The app features parental controls, and the website offers Kids Savings Account: 101, which teaches the basics of saving.

Golden 1 Credit Union

  • Eligible age range: Up to 18 years of age
  • Availability: An adult must own the Youth Savings Account jointly with the child. If you work or live in California, or belong to one of the nearly 1,000 employee groups, you can join Golden 1 Credit Union.
  • Parent-friendly features: Golden 1’s Financial Wellness Center offers free online tutorials, including ones on family conversations about money and budgeting for families.

USALLIANCE Federal Credit Union

  • Eligible age range: The MyLife Savings for Kids is for those up to 13 years of age, and then it transitions to a checking or savings account designed for teenagers.
  • Availability: Membership in USALLIANCE is open to members of four participating associations, or to those who live, work or worship in select communities in Massachusetts, Connecticut and New York.
  • Kid-friendly features: Children earn $10 in “Birthday Bucks” each year. The credit union’s website also has a budgeting aid and a Financial Education page, both of which contain learning resources for kids.

Wells Fargo

  • Eligible age range: For the Wells Fargo Kids Savings Account, children ages 12 and under must have an adult co-owner. Kids who are 13 and older can open the account as an individual or with an adult co-owner. The $5 monthly service fee is waived if the primary account owner is age 24 or younger.
  • Availability: The Wells Fargo Kids Savings Account can be set up as a joint ownership account or a custodial account. The account must be opened in a branch when it’s a joint account or when the child is 17 years of age or younger.
  • Kid-friendly features: Wells Fargo offers student resources on its website.

4. Look for the highest yields

Search for high-yield savings accounts. Credit unions and online-only banks typically offer the best rates, but don’t just shop for rates. Accounts with the highest rates may not have other features that you want.

5. Avoid account fees and ask about features

Some banks and credit unions waive monthly fees and minimum-balance requirements if the account is for a minor child. Ask about account perks and features, such as online tutorials and parental controls.

6. Don’t forget about saving for college

Most parents can’t afford to wait when it comes to saving money for their child’s education. The average cost to send a child to a public, in-state, four-year institution is $10,950 per academic year, according to College Board. It’s $39,400 for a private, nonprofit four-year school.

There are a variety of ways to build up savings for that daunting expense. You just have to decide which one works best for your family’s goals and circ*mstances.

  • 529 account: Most parents save for college in 529 plans, which allow you to invest after-tax money into diversified, low-cost stock and bond funds and then withdraw the money tax-free for qualified education expenses.
  • UGMA/UTMA accounts: UGMA and UTMA accounts are custodial accounts that allow parents, grandparents and others to transfer assets to a minor child. The assets are managed for the child until he or she reaches adulthood. Custodial accounts are considered assets, so they have tax implications. Be wary of these accounts if you suspect your child may one day need financial aid to attend college — custodial accounts can disqualify a student or reduce how much they qualify to receive.
  • Education Savings Account (ESA): Also known as “Coverdell ESAs,” these accounts get no special tax treatment from the states, but federal taxes are deferred. The IRS doesn’t tax withdrawals as long as they are used for qualifying education expenses. ESAs have little impact on eligibility for financial aid, even if the student owns the account.

Whatever your financial goals are for your child, make learning about money fun. The rewards will pay off handsomely for both of you.

Children’s savings accounts FAQs

  • To open a savings account for your child, you typically need to provide information including your child’s name, birthdate and Social Security number. You’ll also likely need to provide your own Social Security number, driver’s license number, address, phone number and email address. You’ll likely be able to deposit money in person (if you’re at a branch) or via an electronic transfer from another bank account. Some banks require a minimum opening deposit.

  • Often, banks will automatically convert a kid’s savings account to an adult one when a child turns 18 years old. The bank may provide paperwork to be signed by your child at that time.

Bottom line

It’s never too soon to get your child started on a savings path and a kid-friendly savings account can go a long way toward establishing good money-saving habits.

They’re not only a safe place to keep money and earn a little interest, but they’re also a proven way to help teach your child about money management and saving toward financial goals.

How To Open A Savings Account For A Child | Bankrate (2024)

FAQs

What do I need to open a savings account for my child? ›

To open a savings account for your child, you typically need to provide information including your child's name, birthdate and Social Security number. You'll also likely need to provide your own Social Security number, driver's license number, address, phone number and email address.

What is the best savings account to start for a child? ›

Summary of Best Savings Accounts for Kids and Teens 2024
AccountForbes Advisor RatingMonthly Maintenance Fee
Bethpage Federal Credit Union Student Savings4.7$0
USAlliance Federal Credit Union MyLife Savings for Kids4.7$0
Alliant Credit Union Kids Savings Account4.6$0
M&T Starter Savings Account4.6$0
1 more row
Aug 30, 2024

Which bank is best for a child savings account? ›

Summary of Best Bank Accounts for Minors
Savings AccountForbes Advisor RatingLEARN MORE
Kotak Mahindra Bank junior savings account4.8View More
IDFC minors savings account4.8View More
HDFC Bank Kids savings account4.7View More
ICICI Bank Young Stars savings account4.6View More
1 more row

Is it worth opening a savings account for a child? ›

Understanding the Benefits of a Child's Savings Account

A child's account also instills good money habits, like how to save money. By seeing their account balances grow and having a stake in their savings goals, children can learn the value of delayed gratification and responsible money management.

Do you need a child's Social Security number to open a savings account? ›

You need an SSN to claim your child as a dependent on your income tax return. Your child may also need a number if you plan to: Open a bank account for the child. Buy savings bonds for the child.

What is the best way to save money for kids? ›

5 Ways to Save For Your Kids
  1. Create a College Savings Plan. ...
  2. Start a 529 Plan for your Kid. ...
  3. Create a Trust Fund for Your Kid. ...
  4. Create an Investment Account for Your Kid. ...
  5. Create a Retirement Account for Your Kid.
May 22, 2024

Where should I put my child's savings? ›

Here are six ways to save for your child:
  1. High-yield savings or money market account.
  2. Certificate of deposit.
  3. UTMA or UGMA account.
  4. 529 plan.
  5. Trust.
  6. ABLE account.
Apr 16, 2024

What bank is best for kids savings? ›

Why we rate them:
ProviderAccount nameInterest rate (AER)
Loughborough Building SocietyJunior ISA4.80%
Stafford Railway Building SocietyJunior Cash ISA4.75%
Coventry Building SocietyJunior Cash ISA (2)4.70%
Leek Building SocietyJunior Cash ISA Savings Account4.50%
1 more row
Sep 4, 2024

Do I have to pay taxes on my child savings account interest? ›

Interest earnings for a children's savings account are subject to income tax if they exceed a certain amount. If your child's interest, dividends and other unearned income total more than $2,200 in one year, the unearned income for certain children might be hit with federal taxes.

Can I open a child's savings account online? ›

Can I open a children's account online? Yes, you can open a children's account online today. Whether a parent or guardian needs to be present depends on the age of the child and the type of account you're looking to open. If you're looking to set up a pocket money card for your kid online, it's easy.

Where to deposit money for kids? ›

Shape your child's future with ICICI Bank's financial solutions!
  • Fixed Deposit. Ensure a stable foundation for your child's dreams.
  • Sukanya Samrudhi Yojana. A scheme by the Government of India. ...
  • Mutual Funds. Plan for your child's future with long-term investments through Mutual Funds.
  • PPF. ...
  • Education Loans.

Is there a free bank account for kids? ›

Monzo for Under 16s. A Free Bank Account for Kids Aged 6-15.

How do I set up a savings account for my child? ›

What Documents Do You Need to Open a Children's Savings Account?
  1. Birth certificate.
  2. Social Security card.
  3. Immunization records.
  4. School photo ID.
  5. Passport.
  6. Driver's license (if your child is old enough to have one)
Mar 21, 2024

At what age should a child have a savings account? ›

Financial experts suggest most kids are able to grasp money concepts by age 9, which makes it a good age to open an initial savings account. Because checking accounts require greater financial responsibility, they suggest waiting until your child turns 15 to open a checking account.

How much should a kid put in savings? ›

The general rule long touted by financial experts is that kids should use a three tier system to work with their money. These experts usually recommend giving at least 10% to charity and putting another 10 to 20% into savings. That leaves 70 to 80% for spending. This is only a starting point, however.

What do I need to open a child's bank account? ›

Your child's passport, birth certificate or provisional driving licence as proof of ID. Your own proof of ID and your proof of your address, for example an energy bill or council tax bill.

What does a parent need to open a bank account for their child? ›

What Will A Minor Need To Open A Bank Account?
  • The minor's name, date of birth, and Social Security number.
  • The parent or guardian's Social Security number.
  • The parent or guardian's valid photo ID (e.g., driver's license or passport)
  • The parent or guardian's contact information (e.g., phone number or email address)
Jul 10, 2024

Can a grandparent open a savings account for a minor? ›

To open these types of saving accounts for a grandchild, the grandparent would typically just need to provide proof of identity, such as a birth certificate. It's also handy to note that the interest on a child's savings account won't be taxed if the money comes from a grandparent.

Can an aunt open a savings account for a child? ›

Benefits of Setting Up Custodial Accounts for Minors

Anyone—whether it's a parent, grandparent, aunt or another loved one—can open a custodial account; that person can then contribute up to $17,000 per year (as of 2023) without incurring the federal gift tax.

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