By Yuliya Goldshteyn, Bankrate.com
Opening a savings account for your child can provide a safe place for their money and 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 or guardians can choose between a custodial account or a savings account designed for kids. Many financial institutions offer both options.
How to open a savings account for a child
Opening a savings account for a child is very similar to opening one for an adult. Here are the steps to take to open a savings account for a baby or child.
1. Choose your account
There are two types of savings accounts you can open for a kid: a custodial account and a kid’s savings account.
- A custodial account is an account that adults can set up and manage on a minor child’s behalf until the child is a legal adult. These can be standard savings accounts, certificates of deposit (CDs), or certain investment accounts that allow you to hold assets other than cash (called uniform transfer to minors accounts (UTMA) or uniform gift to minors accounts (UGMA).
- A kid’s savings account is usually opened as a joint savings account where both the parent or guardian and the minor child are the owners. These accounts often come with features like parental controls, educational tools and features for learning about money.
You can find both types of accounts at banks and credit unions, though not all financial institutions offer them. For UTMAs and UGMAs, you can also look at brokerages.
Two of the most important things to look for in a savings account for a kid are high yields and low (or no) fees. Before you choose, ask about account special features, such as parental controls.
Here are a few banks and credit unions that offer custodial savings or kid’s savings accounts to get your started:
- Alliant Credit Union
- Ally Bank
- Bank of America
- Bethpage Federal Credit Union
- Capital One
- Golden 1 Credit Union
- USALLIANCE Federal Credit Union
- Wells Fargo
2. Prepare the required documents and information
To open a savings account for your child, you typically need to provide contact details and information verifying your identities.
Adults should be prepared to share contact information such as:
- Phone number
- Home address, including proof of address (such as an electricity bill)
You’ll also need to provide proof of ID. These documents may include:
- Social Security number (both the adult and the minor)
- Student/school ID card (for the minor)
- Birth certificate (for the minor)
- Driver’s license
- Passport
- Military ID
Check with your bank or credit union to see which documents they’ll take as proof of identity.
3. Make your initial deposit
While some banks don’t require a minimum deposit to open an account, others may require something like $25 or more. Either way, you’ll want to fund your account quickly to avoid early account closures and also so you can start earning interest!
You can likely fund your account with a transfer from another bank account the parent/guardian owns, with a check via mobile check deposit, or by bringing in cash or a check to a branch.
4. Set up online banking credentials
Whether you opened up your account online or at a physical branch, you’ll want to set up an online banking log-in so you or the child can sign on to the bank’s website or app to manage the account.
Consider a separate savings account for college
There are a variety of accounts that help you build up savings for the daunting expense of college. You just have to decide which one works best for your family’s goals and circumstances. Two accounts you can choose from include:
- 529 account, which allows you to invest after-tax money and then withdraw the money tax-free for qualified education expenses.
- 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 and ESAs have little impact on eligibility for financial aid.
Children’s savings accounts FAQs
- What do I need to open a savings account for my child? To open a savings account for your child, you’ll need to present documents proving your and your child’s identity. This can include your child’s name, birthdate and Social Security number. For yourself, you’ll likely need to provide a Social Security number as well as a government-issued ID, such as a driver’s license. You’ll also need to provide contact information, such as your address, phone number and email address.
- What happens to my kid’s bank account at age 18? 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.
- Can I open a savings account for a baby? Yes, you can open a savings account for a baby at banks and credit unions that offer kids’ bank accounts. You must provide the required verification documents to open an account, such as the baby’s Social Security number and birth certificate.
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.
- The best high-yield savings accounts Contact the bank to see if these accounts can be opened as custodial accounts.
- The best kid’s savings accounts These accounts can help teach kids money management skills.
Key takeaways
- A parent or guardian will need to open the account for the child.
- You can open an account for a child of any age, even a newborn.
- You’ll need documents that prove your identity, for both the adult and the minor, when opening an account.
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