What You Need to Open an Account in Your Grandchild's Name

You can open a savings account for your grandchild at most banks and credit unions, but the account structure depends on your grandchild's age and your relationship to them. If your grandchild is a minor, you will be the account owner or custodian, and your grandchild's name appears on the account. The bank will require your Social Security number, your grandchild's Social Security number (or tax ID), proof of identity for you, and proof of your grandchild's identity or birth certificate.

Some banks let you open an account online; others require you to visit a branch in person. If your grandchild is under 13, most banks require at least one parent or legal guardian to consent, even if you are opening and funding the account. Check with your bank about their specific policy before you start, because this varies by institution.

You do not need a minimum deposit to open most savings accounts for minors, though some banks set a small opening deposit (often $25 or less). Once the account is open, you can add money whenever you want, and your grandchild can watch the balance grow.

Key Takeaways

  • You will need your Social Security number, your grandchild's Social Security number or tax ID, and proof of identity for both of you to open an account.
  • If your grandchild is under 13, at least one parent or legal guardian must consent to the account, even if you are the one opening it.
  • Most banks offer accounts for minors with no or very low minimum deposits, and you can fund the account from your own money.
  • The account belongs to your grandchild, but you control it until they reach the age of majority (usually 18 or 21, depending on your state and the account type).
  • Interest rates on savings accounts for minors are typically low, so compare banks to find the best rate for long-term growth.

Choosing Between a Custodial Account and a Joint Account

The two main structures for a minor's savings account are a custodial account (also called an UTMA or UGMA account in some states) and a joint account. In a custodial account, you are the custodian and you manage the money until your grandchild reaches the age of majority—usually 18 or 21, depending on your state. At that point, the account transfers to your grandchild's full control, and you have no further say in how the money is used.

A joint account has both your name and your grandchild's name on it, and either of you can withdraw money. Joint accounts are simpler to set up and do not require the same legal paperwork as custodial accounts, but they also mean your grandchild can access and spend the money before you intended. Joint accounts also become part of your grandchild's assets if they face legal trouble later.

Custodial accounts offer more protection because the money is legally your grandchild's, but you control it until they come of age. The trade-off is that custodial accounts have tax consequences—money in the account may be taxed at your grandchild's rate (usually lower than yours) once the account earns more than a small amount each year. Ask your bank which type they offer and what the rules are in your state.

Where to Open the Account

You can open a savings account for your grandchild at a traditional bank, an online bank, or a credit union. Traditional banks have physical branches where you can walk in and speak to someone, which can be helpful if you have questions. Online banks often offer higher interest rates because they have lower overhead costs, but you handle everything by phone, email, or their website.

Credit unions are member-owned and often have lower fees and better rates than traditional banks, though you may need to meet membership requirements (such as living in a certain area or working for a specific employer). Compare the interest rate, any monthly fees, minimum balance requirements, and whether the account has restrictions on how often your grandchild can withdraw money.

Many banks offer accounts designed specifically for minors, sometimes with educational tools or features that teach your grandchild about saving. These accounts may have slightly lower interest rates than adult accounts, but they often come with no monthly fees and no minimum balance.

Documents and Information You Will Bring

Bring a government-issued photo ID for yourself—a driver's license, passport, or state ID card. You will also need your grandchild's birth certificate or Social Security card to verify their identity and obtain their Social Security number. If you do not have your grandchild's Social Security number, you can request one from the Social Security Administration before opening the account, or the bank may be able to help you apply for one during the account opening process.

Bring your own Social Security number and your grandchild's. If a parent or legal guardian must consent, they should be present or provide written consent, depending on the bank's policy. Some banks accept consent by email or phone; others require a signature in person.

If you are opening the account online, you will upload images of these documents through the bank's website or app. If you are opening in person, bring the originals or certified copies. Call the bank ahead of time to confirm exactly what they need—requirements vary by institution.

Setting Up Automatic Deposits and Teaching Your Grandchild

Once the account is open, you can set up automatic transfers from your own bank account to your grandchild's savings account. This is a simple way to add money on a regular schedule—weekly, monthly, or whenever you choose. You can also make one-time deposits by visiting the bank, using their app or website, or having the bank transfer money from another account you own.

Many grandparents use a savings account as a teaching tool. You might deposit money for birthdays or holidays and let your grandchild watch the balance grow, or you might match money your grandchild earns from chores or part-time work. Some banks let you set savings goals within the app, which can help your grandchild visualize what they are saving toward.

As your grandchild gets older, you can gradually give them more control. Some banks allow teenagers to have their own debit card linked to the savings account, or to log in and view the balance themselves. Talk to your bank about what options are available as your grandchild matures.

Tax Considerations and Reporting

Money you deposit into your grandchild's account is a gift, and gifts under a certain amount per year (currently $18,000 per person, though this changes annually) do not trigger gift tax for you or your grandchild. However, any interest the account earns may be taxable to your grandchild. If the account earns more than a small threshold each year (currently $1,300 for 2024, though this varies by year), your grandchild may need to file a tax return or you may need to report the income on your own return.

Custodial accounts have specific tax rules. The first portion of earnings is usually tax-free, the next portion is taxed at your grandchild's rate (often lower than yours), and earnings above that threshold may be taxed at your rate. Your bank will send you a 1099 form each year if the account earns taxable interest, and you should consult a tax professional about how to report it.

Keep records of all deposits and withdrawals, and save the 1099 forms the bank sends you. This documentation will help you and your grandchild understand the account's growth over time and make tax filing easier.

What Happens When Your Grandchild Turns 18 or 21

When your grandchild reaches the age of majority (18 in most states, 21 in a few), a custodial account automatically transfers to their full control. You will no longer have access to the account or any say in how the money is used. The bank will notify you and your grandchild when this transition happens, usually a few months before the birthday.

If you want to discuss the account with your grandchild before the transfer, do so while you still have time. Some grandparents use this moment to talk about financial goals, budgeting, and how to use the money wisely. Your grandchild may decide to keep the account open at the same bank, move it to a different bank, or withdraw the money entirely.

If you have a joint account instead of a custodial account, your grandchild has always had the legal right to withdraw money, so the transition at 18 or 21 is less formal. However, you should still have a conversation about the account and what your grandchild plans to do with it.

Frequently Asked Questions

Do I need the parents' permission to open a savings account for my grandchild?

If your grandchild is under 13, most banks require at least one parent or legal guardian to consent. If your grandchild is 13 or older, some banks allow you to open an account with just your grandchild's consent, though policies vary. Call your bank to ask about their specific age requirements and consent rules.

Can I put money in the account without the parents knowing?

Yes, you can deposit money into a custodial or joint account you have opened, and the bank will not notify the parents. However, if the account is custodial and earns taxable income, the parents may find out when they file taxes or receive statements. If family relationships are strained, consider talking to the parents first to avoid conflict later.

What if I want to leave money to my grandchild in my will instead?

A savings account you open now is separate from your will. Money in the account belongs to your grandchild (or is controlled by you as custodian) and does not pass through your estate. If you want to leave additional money to your grandchild through your will, you should speak with an estate planning attorney about how to structure that alongside any account you open now.

Can my grandchild lose access to the money if I pass away?

If you are the custodian of a custodial account and you pass away, the account does not automatically close. However, the bank may freeze it until a court appoints a new custodian or until your grandchild reaches the age of majority. Discuss this possibility with your family and consider naming a backup custodian in your will or with the bank if that option is available.

What interest rate should I expect on a minor's savings account?

Interest rates on savings accounts vary widely by bank and change frequently. As of 2024, rates range from nearly 0% at some traditional banks to 4% or higher at some online banks, though these rates fluctuate. Compare rates at several banks before opening an account, and check periodically to see if a better rate becomes available elsewhere.