Yes, you can open a savings account in your grandchild's name

You can set up a savings account for a grandchild in three main ways: open a custodial account where you manage the money until they reach adulthood, add them as a joint account holder on your own account, or open a regular savings account in their name if they are old enough. The route you choose depends on the child's age, how much control you want to keep, and what the money is for.

The most common choice for younger grandchildren is a custodial account, which lets you deposit money and make decisions about it while the child is a minor. At a set age—usually 18 or 21, depending on your state and the bank—the account transfers to them automatically and becomes theirs to control. No court paperwork is required, and you do not need the parents' permission, though telling them is practical.

Key Takeaways

  • A custodial account lets you save money for a grandchild and control it until they turn 18 or 21, at which point it becomes theirs automatically.
  • You will need the child's Social Security number, birth date, and address to open any account in their name.
  • Money in a custodial account counts as the child's asset for financial aid purposes, which can reduce their aid may be able to access later.
  • Joint accounts with your grandchild give you both access to the money right now, but the full balance becomes part of your estate if you die.
  • Most banks and credit unions offer custodial savings accounts with no minimum deposit, though some require $25 to $100 to start.

Custodial accounts: the most common choice for grandchildren

A custodial account is a regular savings account that you open and manage on behalf of a minor. You are the custodian—the adult responsible for the account—and the grandchild is the beneficiary. You can deposit money, withdraw it, and make all decisions about the account. The child cannot touch the money or make changes until they reach the age of majority in your state, usually 18 or 21.

When the child turns that age, the account automatically becomes theirs. They get full access and control, and you have no say in what they do with it. This is why custodial accounts work best when you trust the child's judgment or when the money is meant as a long-term gift rather than something you might need back.

To open a custodial account, you will need the child's Social Security number, date of birth, and current address. Most banks and credit unions let you open one in person or online. Some have no minimum deposit; others ask for $25 to $100 to start. The account earns interest, though rates on savings accounts are usually low—typically less than 1% per year at most banks.

What documents and information you need

Bring or provide your own government-issued ID, proof of address (a recent utility bill or bank statement), and your Social Security number. For the grandchild, you will need their Social Security number, full legal name, date of birth, and current address. If the child does not have a Social Security number yet, you can apply for one at your local Social Security office or online at ssa.gov before opening the account.

Some banks ask whether you are the parent or guardian. Be honest: say you are the grandparent. Banks are used to custodial accounts opened by grandparents and will not refuse you. If you are opening the account online, the bank may mail a form for you to sign in front of a notary, or they may verify your identity through a video call.

How custodial accounts affect financial aid and taxes

Money in a custodial account is treated as the child's asset, not yours. This matters for financial aid: when your grandchild turns 18 and fills out a college financial aid form, the account balance counts toward their assets. Assets reduce the amount of need-based aid they may receive—roughly 20% of student assets are expected to go toward college costs, compared to 5.64% of parent assets. If the account has $10,000 when they turn 18, it could reduce their aid by around $2,000 per year.

For taxes, the child owes tax on interest the account earns, but only if the interest exceeds a threshold set each year by the IRS—$1,300 in 2024, though this changes annually. Below that threshold, no tax is owed. The bank will send a 1099-INT form if interest exceeds the limit, and the child (or you, if they are very young) files it with their tax return.

If you are concerned about financial aid, talk to a tax professional or financial planner about alternatives like a 529 college savings plan, which has different rules. For now, know that a regular custodial savings account will count against aid may be able to access.

Joint accounts: when you want shared access right now

A joint account puts both your name and your grandchild's name on the account. You both can deposit and withdraw money anytime. This works well if you want the child to learn about banking early, or if you are saving for something specific like a car and want them involved in watching the balance grow.

The downside is that the full account balance becomes part of your estate when you die. If you have other heirs or debts, this can complicate things. Also, if your grandchild is sued or has money problems later, creditors can go after a joint account. And if the child is a minor, they still cannot legally withdraw money without you—the bank will require your signature.

Joint accounts are simpler to set up than custodial accounts: just bring the child (or their birth certificate and Social Security number if they cannot come in person) and open a regular savings account with both names on it.

Accounts in the child's name alone: for older grandchildren

If your grandchild is a teenager and old enough to understand banking, you can open a regular savings account in their name only. You will not be on the account, but you can give them money to deposit. This teaches them responsibility and gives them full control from the start.

The catch is that you have no access to the account and cannot see the balance or make deposits yourself. You would have to give the child cash or a check to deposit. This works if the grandchild is mature and you trust them, but it does not work if you want to manage the money or keep an eye on it.

Some banks have teen savings accounts with parental oversight features, where a parent or guardian can see the account online but the teen controls it. Ask your bank whether they offer this option.

Where to open a custodial account

Most banks and credit unions offer custodial savings accounts. You can open one at your current bank if you already have an account there, or shop around. Online banks like Ally, Marcus, and Discover often have no minimum deposit and slightly higher interest rates than traditional banks, though still under 1%. Credit unions sometimes offer better rates to members and may have lower fees.

Compare a few places on these points: minimum deposit, interest rate, monthly fees (most waive fees for custodial accounts, but check), and whether you can open online or need to visit in person. Call ahead or check the website to confirm they offer custodial accounts—not all banks do, though most major ones do.

What happens when your grandchild turns 18 or 21

The account automatically transfers to your grandchild on their birthday. You lose access and control. The bank will send them a letter explaining that the account is now theirs. They can keep it open, close it, or move the money elsewhere.

If you want to talk to them about the account before that happens, do it early. Explain what the money is for, whether you expect them to use it for college or save it, and what you hope they will do with it. But understand that once it is theirs, it is their choice.

If you are worried about them spending it unwisely, a 529 college savings plan has stricter rules: money can only be used for education expenses, or the child pays taxes and a penalty on earnings if they use it for something else. That might be a better fit if education is the goal.

Frequently Asked Questions

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

No. As a grandparent, you can open a custodial account without the parents' consent. However, telling them is practical and respectful, especially if you plan to deposit large amounts or if the parents might want to do the same thing.

What if I die before my grandchild turns 18?

The account stays open and the money stays in it. The grandchild will gain control when they reach the age of majority. If you want someone else to manage it in the meantime, you would need to set that up separately through your will or by naming a successor custodian when you open the account—ask your bank whether they allow this.

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

Legally, no. The money belongs to the child, not to you. Withdrawing it for yourself is considered a violation of your duty as custodian and can have tax consequences. If you need the money back, a custodial account is not the right tool—consider a joint account or simply giving the child money as a gift instead.

Will a custodial account affect my grandchild's may be able to access for government benefits?

It depends on the benefit. For Supplemental Security Income (SSI) or Medicaid, large custodial accounts can disqualify the child. If your grandchild receives SSI or Medicaid, talk to a benefits counselor before opening an account. For most other benefits, it does not matter.

Can I set up a custodial account if my grandchild lives in a different state?

Yes. You can open an account at a bank or credit union in your state, your grandchild's state, or any state where the bank operates. Online banks make this easiest since you do not need to visit a branch. You will still need the child's Social Security number and address.