Yes, grandparents can open a bank account for a grandchild, but the account structure and your role in it depend on the child's age and the bank's rules

If the grandchild is under 18, you will open what is called a custodial account or minor account. You are the custodian—the adult responsible for the account—but the money legally belongs to the child. The child's name and Social Security number go on the account, and you can deposit money, manage it, and make withdrawals on their behalf until they reach the age of majority (usually 18 or 21, depending on your state and the account type).

If the grandchild is 18 or older, they open the account themselves. You cannot open an account in their name without their presence and consent, even if you intend to fund it. You can give them money to deposit, but the account belongs to them from the start.

The practical difference matters: a custodial account lets you control the money while the child is young. Once they turn 18 or 21, the account transfers to their full control, and you lose access to it. This is by law, not by choice.

Key Takeaways

  • Grandparents can open a custodial account for a grandchild under 18 using the child's name and Social Security number, and you control the account until they reach the age of majority.
  • Most banks require the grandchild to be present in person to open a custodial account, though some allow remote opening with an ID verification process.
  • When the grandchild turns 18 or 21 (depending on your state and account type), the account becomes theirs to control, and you lose access automatically.
  • Custodial accounts are reported on the child's credit file and may affect their financial aid may be able to access later, so understand the tax and aid implications before funding it heavily.
  • If you want to leave money for a grandchild but do not want them to control it at 18, a trust or a 529 education savings plan may be better options than a custodial bank account.

What you need to bring to open a custodial account

You will need two forms of ID—one with a photo—in your name. Bring the grandchild's birth certificate and Social Security card (or the number if you have it). Some banks ask for proof of the grandchild's address; a utility bill or lease in your name at your address usually works if the child lives with you, or you can bring a letter from the child's parent confirming their address.

The grandchild must be present at the bank in person for most institutions. A few banks—including some online banks—allow remote opening if you can verify the child's identity through a video call or by uploading a photo ID, but this is not standard. Call the bank ahead to ask whether they require the child to come in.

You will also need to decide what type of account: a savings account, a checking account, or both. Savings accounts earn interest (though rates are low at most banks). Checking accounts come with a debit card, which is useful if the grandchild is old enough to make purchases, but also carries the risk that they will spend the money. Many banks offer accounts designed for minors with limited debit card features or spending caps.

How custodial accounts work once they are open

Once the account is open, you can deposit money whenever you want. You can withdraw money to pay for the child's expenses—school supplies, medical bills, sports fees, clothing. You do not need the child's permission to withdraw, and the child cannot withdraw money without you (or another authorized adult) present, depending on the account terms.

The account is in the child's name, so it shows up on their credit report and their financial record. This matters later: when the child turns 18 and applies for student loans or financial aid, the account and its balance will be counted as their asset. Schools use asset information to calculate how much aid a student should receive, so a large balance in a custodial account can reduce the aid they are offered.

You can add other adults as authorized users—the child's parent, for example—so they can also withdraw money or manage the account. The bank will tell you how to do this when you open the account.

What happens when the grandchild turns 18 or 21

The account automatically converts to a regular account in the child's name. You lose access. You cannot see the balance, make withdrawals, or manage it anymore. The money is theirs to keep or spend as they choose. This happens by law; the bank does not ask your permission or the child's permission. It straightforward happens on the date set by your state's law.

Some states use age 18 as the cutoff; others use 21. A few states allow you to choose between 18 and 21 when you open the account. Ask the bank which age applies in your state and for your account type.

If you want the money to stay protected or restricted after the child turns 18, a custodial account is not the right tool. A trust, a 529 education savings plan, or a Uniform Transfers to Minors Act (UTMA) account with specific restrictions may work better, but these require legal setup and are more complex than a straightforward bank account.

Tax reporting for custodial accounts

Interest earned in a custodial account is taxed as the child's income, not yours. If the account earns less than a certain amount per year (the threshold changes annually, but is typically around $1,200), no tax return is required. If it earns more, the child or their parent must file a tax return reporting the interest.

The bank will send a 1099-INT form each January if the account earned interest above the reporting threshold. You or the child's parent will use this to file taxes. This is straightforward for most families, but it is worth knowing about if you are planning to deposit a large sum that will earn significant interest.

Alternatives if you want more control or protection

If you want the money to stay protected after the grandchild turns 18, or if you want to set conditions on how it is used, a custodial account is not enough. A trust lets you name a trustee (yourself or someone else) to manage the money and decide when and how the grandchild receives it—at 25, at 30, or only for education, for example. Setting up a trust requires a lawyer and costs money upfront, but it gives you much more control.

A 529 education savings plan is designed specifically for education expenses. Money in a 529 grows tax-free if used for tuition, room and board, books, or other may have access to education costs. If the grandchild does not go to college, the money can be transferred to another family member's 529 or withdrawn (with taxes and a penalty on the earnings). A 529 is easier to set up than a trust and has tax advantages, but it is restricted to education.

An UTMA (Uniform Transfers to Minors Act) account is similar to a custodial bank account but can hold investments like stocks or mutual funds, not just cash. It also converts to the child's control at 18 or 21. The advantage is growth potential; the disadvantage is the same loss of control when they turn 18.

Frequently Asked Questions

Do I need the child's parent's permission to open a custodial account?

No. As a grandparent, you have the legal right to open a custodial account for your grandchild without the parent's permission. However, it is wise to tell the parent what you are doing, especially if the child lives with them or if you plan to fund it significantly. Some families have disagreements about money, and transparency prevents conflict later.

Can I use a custodial account to save for college?

Yes, but understand that the balance will count as the child's asset when they explore for financial aid, which may reduce the aid they receive. A 529 education savings plan is often better for college savings because it has tax advantages and does not count as heavily against financial aid may be able to access.

What if the grandchild's parent wants to withdraw money from the account?

Only authorized users can withdraw. If you open the account as the sole custodian, the parent cannot withdraw without your permission. You can add the parent as an authorized user when you open the account, or later, if you want them to have access. The choice is yours.

Can I close the account before the grandchild turns 18?

Yes. You can close a custodial account at any time. The money goes to you (as the custodian) or to the child's parent, depending on the bank's rules and your instructions. Once the child turns 18 or 21, you cannot close it—it is their account.

What happens if I die before the grandchild turns 18?

The account does not automatically go to another person. Your will or trust should name a successor custodian—someone to take over management of the account until the grandchild reaches the age of majority. If you do not name a successor, the court may appoint one, or the account may be frozen until a legal guardian is named. Discuss this with the child's parent or a lawyer when you open the account.