You need to be 18 to open a high yield savings account in your own name

Most banks and online financial institutions require you to be at least 18 years old to open a high yield savings account by yourself. At 18, you can open an account, sign the terms, and control the money without a parent or guardian involved. If you are under 18, you have two paths: open a custodial account with a parent or guardian, or wait until you turn 18.

High yield savings accounts pay significantly more interest than regular savings accounts — currently ranging from 4% to 5.35% annual percentage yield (APY) depending on the bank and market conditions. The higher rate makes these accounts worth opening as soon as you can, because the interest compounds and grows your money faster.

Key Takeaways

  • You must be 18 to open a high yield savings account in your own name at most banks and online institutions.
  • If you are under 18, you can open a custodial high yield savings account where a parent or guardian is the account owner and you are the beneficiary.
  • Custodial accounts let you earn the same high interest rates as adult accounts, but the adult controls withdrawals and account decisions until you reach the age of majority (usually 18 or 21, depending on your state).
  • Some banks allow you to become the sole owner at 18 without closing the account, while others require you to open a new adult account and transfer the money.
  • Online banks typically have lower minimum deposit requirements than brick-and-mortar banks, making them easier to start with as a young person.

How custodial high yield savings accounts work for minors

A custodial account is opened and owned by an adult — usually a parent, grandparent, or legal guardian — but the money inside belongs to the minor. The adult is the custodian and has legal control over the account until the minor reaches the age of majority in their state, typically 18 or 21. During that time, the adult can deposit money, withdraw funds, and make decisions about the account, but the money is still considered the minor's property for tax purposes.

The minor's Social Security number is used to open the account, not the custodian's. This means the interest earned is reported on the minor's tax return, not the custodian's. The custodian cannot use the money for their own purposes — it must be spent for the benefit of the minor or transferred to the minor when they reach the age of majority.

High yield savings accounts offered as custodial accounts earn the same interest rates as regular adult accounts at the same bank. You are not giving up the higher rate to have a parent involved. The only trade-off is that the adult controls when money can be withdrawn until you reach the age of majority.

What happens when you turn 18

When you turn 18, the custodial account does not automatically convert to an adult account. What happens next depends on the bank's policy. Some banks allow you to take over the account by signing new paperwork, and the custodian's name is removed. Others require you to open a completely new adult high yield savings account and transfer the balance from the custodial account.

Contact your bank before your 18th birthday to find out their specific process. Ask whether you can convert the existing account or whether you will need to open a new one. If you need to open a new account, ask about any waiting periods or minimum balances for the new account, and whether there are any fees for transferring money between accounts at the same bank.

The timing matters because your money will earn interest during the transfer process. If the bank requires you to close the custodial account and open a new one, the money may sit in a checking account or money market account temporarily, earning little or no interest. Moving quickly after your birthday minimizes this gap.

Banks and online institutions that offer custodial high yield savings accounts

Most online banks offer custodial high yield savings accounts because they have lower overhead costs and can pass those savings to customers in the form of higher interest rates. Traditional brick-and-mortar banks often offer custodial accounts too, but their rates are typically lower — often 0.01% to 0.5% APY compared to 4% to 5% at online institutions.

Online banks that commonly offer custodial high yield savings accounts include Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, Wealthfront Cash Account, and Vanguard Cash Management. Each has different minimum deposit requirements — some have no minimum, while others require $100 or $500 to open. Check the current rates and minimums on each bank's website, because both change frequently.

If you prefer to bank in person, ask your local bank or credit union whether they offer custodial high yield savings accounts. Credit unions sometimes offer competitive rates and may have more flexible policies around account conversion at age 18. However, you will likely earn less interest than you would at an online institution.

Documents and information you will need

To open a custodial high yield savings account, the bank will need the minor's Social Security number, date of birth, and address. The custodian will need to provide their Social Security number, government-issued ID, and proof of address. Some banks ask for a phone number and email address for both the minor and the custodian.

You will not need to visit a branch in person for online banks. The custodian can open the account entirely online by uploading photos of their ID and providing the required information. The account is usually ready to use within one to three business days. Transfers from another bank may take an additional three to five business days to clear.

If you are opening the account at a brick-and-mortar bank, both the minor and custodian may need to visit the branch together. Call ahead to confirm what documents to bring and whether an appointment is required.

Interest rates and how they compare to regular savings accounts

High yield savings accounts currently pay between 4% and 5.35% APY, depending on the bank and the current interest rate environment. A regular savings account at a traditional bank typically pays 0.01% to 0.05% APY. Over time, this difference adds up significantly.

For example, if you deposit $1,000 in a regular savings account earning 0.01% APY, you earn about $0.10 per year. The same $1,000 in a high yield savings account earning 4.5% APY earns about $45 per year. After five years, the high yield account would have grown to approximately $1,246, while the regular account would have only $1,000.50. The difference grows larger the longer the money sits and the more you add to it.

Interest rates change based on Federal Reserve decisions, so the rates available today will not be the same next month or next year. When you open an account, the rate you receive is may provide for that account, but the bank can change the rate at any time going forward. Check your bank's website or log into your account regularly to see whether the rate has changed.

Restrictions and rules for custodial accounts

The main restriction is that the custodian controls withdrawals. If you want to take money out before you reach the age of majority, you need the custodian's permission. Some banks allow the custodian to set up automatic transfers or allow the minor to withdraw money using a debit card, while others require the custodian to approve each withdrawal.

Another rule to know: money in a custodial account is considered an asset when you apply for financial aid for college. Schools use the Free Application for Federal Student Aid (FAFSA) to determine how much aid you need, and custodial accounts are counted as the student's assets, not the parent's. This can reduce the amount of need-based aid you receive. Talk to your parents about this before opening a large custodial account if you plan to attend college.

There are no contribution limits to custodial accounts — you can deposit as much money as you want. However, there are tax implications if the account earns more than a certain amount of interest in a single year. For 2024, if the minor's unearned income (interest, dividends, etc.) exceeds $1,300, the excess is taxed at the parent's tax rate rather than the minor's rate. This is called the "kiddie tax" rule. Talk to a tax professional if you expect the account to earn more than this amount.

Frequently Asked Questions

Can a 16-year-old open a high yield savings account without a parent?

No, most banks require you to be 18 to open an account in your own name. At 16, you can open a custodial account with a parent or guardian as the account owner. Some banks may allow 17-year-olds to open accounts with parental consent, but this is rare — contact your bank to ask about their specific age policy.

What is the difference between a custodial account and a regular savings account?

A custodial account is owned by an adult but the money belongs to the minor. A regular savings account is owned by the person whose name is on it. Custodial accounts earn the same interest rates as regular accounts at the same bank, but the adult controls withdrawals until the minor reaches the age of majority. After that, the accounts work the same way.

Can I move money from a custodial account to a different bank after I turn 18?

Yes. Once you own the account, you can transfer the money to any other bank. Contact your new bank to start the transfer process — they will guide you through it. The transfer typically takes three to five business days. Make sure the custodial account is fully converted to your name before you transfer, or the original bank may not release the funds.

Do I have to tell the IRS about interest earned in a custodial account?

Yes, if the interest earned exceeds $600 in a single year, the bank will send a 1099-INT form to the IRS and to the minor's address. The interest must be reported on the minor's tax return. If the interest is under $600, the bank may not send a form, but you should still report it if you file a tax return. Ask a tax professional for guidance based on your specific situation.

What happens to a custodial account if the custodian dies?

The account does not automatically close. The money belongs to the minor, and the account will be handled according to the custodian's will or the laws of your state. If there is no will, the court may appoint a new guardian to manage the account. Contact the bank immediately if the custodian dies so they can explain your options and what paperwork is needed.