Yes, you can open a savings account for your grandson, but the account type depends on his age

If your grandson is under 18, you cannot open an account in his name alone. Banks require the account owner to be at least 18 years old to sign contracts. Instead, you have two main routes: open a custodial account in his name with yourself as the custodian, or open a regular savings account in your own name and manage the money for him informally.

A custodial account is a legal account held in your grandson's name, but you control it until he reaches the age of majority—18 or 21, depending on your state and the account type. The money belongs to him, not to you, which matters for taxes and for what happens if you pass away. A regular account in your name is simpler to set up but offers no legal protection if something happens to you, and the money is technically yours until you give it to him.

If your grandson is already 18 or older, he can open his own account. You can help him do it, but the account will be in his name only, and he will control all decisions about the money.

Key Takeaways

  • Custodial accounts let you open a savings account in your grandson's name with you as the custodian, and you control the account until he reaches 18 or 21.
  • The money in a custodial account belongs to your grandson for tax purposes, which can affect how much tax you owe on interest earned.
  • If your grandson is 18 or older, he can open his own account at a bank or credit union without you as a co-owner.
  • A regular savings account in your name is faster to open but offers no legal protection for the money if you die or become unable to manage it.

How custodial accounts work and what banks call them

Most banks offer custodial savings accounts under the name UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act). These are the same thing in practical terms—a savings account in your grandson's name with you listed as the custodian. You deposit money, earn interest, and manage the account. Your grandson cannot touch the money or make withdrawals without your permission.

When your grandson reaches the age of majority—18 in most states, 21 in a few—the account automatically transfers to him. He then owns it outright and can do whatever he wants with it. You lose all control at that point. This is a legal requirement, not something you can change by agreement with the bank.

Some states also allow 529 college savings plans, which work similarly but are designed specifically for education expenses. The tax treatment is different, and the money can only be used for college, trade school, or certain other education costs without a penalty. If your grandson does not go to college, you may owe taxes on the earnings.

Tax consequences of a custodial account

The interest your grandson's custodial account earns is taxed to him, not to you. This usually means less tax overall, because his income is lower than yours. For 2024, the first $1,450 of unearned income (interest, dividends) is tax-free for a dependent child. The next $1,450 is taxed at his rate. Anything above that may be taxed at your rate.

You do not report the account on your tax return. Instead, your grandson (or you on his behalf) files a tax return reporting the interest earned. If the interest is small—under $600 in most cases—you may not need to file at all, but check with a tax professional about your state's rules.

This tax advantage is one reason custodial accounts are popular for saving for a grandchild. However, the account counts as your grandson's asset if he later applies for financial aid for college, which can reduce the amount of aid he receives.

Opening a custodial account at a bank or credit union

Call or visit your bank or credit union and ask to open a custodial savings account (UTMA or UGMA). Bring your grandson's Social Security number and your own. You will need to show a government-issued ID, and the bank may ask for proof of your relationship to your grandson—a birth certificate or custody documents work.

The process takes 15 to 30 minutes in person, or a few days if you do it by mail or online. Some banks let you start online and finish in a branch; others require you to come in person. Ask whether the account has a minimum deposit—many custodial accounts require $25 to $100 to open.

Once the account is open, you can deposit money whenever you want. You can set up automatic transfers from your checking account if you want to add money on a schedule. The account earns interest at whatever rate the bank offers for savings accounts, which varies widely. Shop around—some banks and credit unions offer higher rates than others.

What happens when your grandson turns 18 or 21

The account automatically transfers to your grandson on his birthday. You no longer have any legal right to the money. He can withdraw it all, spend it, invest it, or leave it alone. You cannot stop him, and the bank will not ask your permission.

Some grandparents worry about this and choose not to use a custodial account for that reason. If you want to keep control of the money, a regular savings account in your name is the alternative, but then you need to make sure your will or trust specifies that the money goes to your grandson after you die. Without that, the money becomes part of your estate and may not go to him.

You can talk to your grandson before he turns 18 about what you hope he will do with the money, but you have no legal way to require it. Some grandparents frame the account as a gift for education, a car, or a first apartment and discuss those goals with their grandson as he gets older.

Alternatives if you want to keep control longer

If you want the money to stay under your control after your grandson turns 18, you can set up a trust instead of a custodial account. A trust is a legal document that names you as the trustee (the person who manages the money) and your grandson as the beneficiary. You can specify in the trust when he gets access to the money—at 21, 25, 30, or whenever you choose. You can also name a successor trustee to take over if you die.

Trusts cost more to set up than custodial accounts—usually $500 to $2,000 with a lawyer—but they give you much more control. They also avoid probate, which means the money goes to your grandson faster if you die, and it stays private instead of becoming part of the public court record.

Another option is to keep the money in your own savings account and update your will to leave it to your grandson. This is the simplest approach but offers no protection if you become unable to manage your finances before you die. A power of attorney document can help with that, but it does not automatically transfer the money to your grandson.

Opening an account for an adult grandson

If your grandson is 18 or older, he can open his own account at any bank or credit union. He will need a government-issued ID and his Social Security number. The process is the same as opening any other savings account—it takes 15 to 30 minutes in person or a few days online.

You can go with him to help, but the account will be in his name only. You will not have access to it unless he adds you as an authorized user, which he can do anytime. If you want to deposit money into his account, he can give you the account number and routing number, or you can transfer money electronically from your bank.

If you want to give him money regularly—for example, to help with college expenses—you can set up automatic transfers from your account to his. This is straightforward and requires no special paperwork.

Frequently Asked Questions

What if I die before my grandson turns 18?

The custodial account becomes part of your estate. Your will or trust should specify that it goes to your grandson. If you have no will, state law decides who gets it—usually your spouse or children, not your grandson. Talk to a lawyer about updating your will if you open a custodial account.

Can I withdraw money from a custodial account for my own use?

Legally, no. The money belongs to your grandson, not to you. If you withdraw it for yourself, you may owe taxes and penalties. Some states allow you to withdraw money you contributed if it was a gift, but the rules vary. Do not use a custodial account as a way to save money for yourself.

Does a custodial account affect my grandson's financial aid for college?

Yes. Colleges count custodial accounts as the student's asset, which can reduce the amount of need-based financial aid he receives. The impact varies by school and by how much money is in the account. If college savings is your main goal, talk to a financial aid advisor about whether a 529 plan might be better.

Can I open a custodial account at a credit union instead of a bank?

Yes. Most credit unions offer custodial accounts with similar rules and often lower fees than banks. You will need to be a member of the credit union, which usually requires living in a certain area or working for a certain employer. Ask your credit union whether they offer UTMA or UGMA accounts.

What if my grandson's mother or father objects to the account?

If your grandson's parents are alive and have custody, they may have legal rights to the money. Laws vary by state. If there is any conflict, talk to a lawyer before opening the account. In some cases, you may need the parents' permission or involvement.