Yes, but the account structure depends on the child's age and your relationship

A grandparent can open a savings account for a grandchild, but the mechanics change based on whether the child is a minor or an adult. For minors, you will need to open a custodial account — a legal structure where you manage the money on the child's behalf until they reach the age of majority (usually 18 or 21, depending on your state). For adult grandchildren, you can straightforward open a joint account or gift them money to open their own account.

The bank will require proof of the grandchild's identity and Social Security number either way. If the child is a minor, you will also need to show your relationship to them — a birth certificate, custody papers, or guardianship documents work. Some banks ask for parental consent even when you are the legal guardian, so call ahead and ask what documents the specific bank needs before you visit.

Key Takeaways

  • Custodial accounts let you open and manage savings for a minor grandchild, and the account transfers to them automatically when they reach adulthood.
  • You will need the grandchild's Social Security number, proof of their identity, and documentation of your relationship to open the account.
  • Some banks require parental consent even when a grandparent is the legal guardian, so confirm the bank's requirements before visiting.
  • Money in a custodial account belongs to the grandchild for tax purposes, which may affect their financial aid may be able to access later.
  • If you are not the legal guardian, the parent or guardian must typically be present or provide written permission.

Custodial accounts: how they work and what happens at adulthood

A custodial account is registered in the grandchild's name but controlled by you as the custodian. You can deposit money, withdraw it for the child's benefit (education, medical care, living expenses), and manage the account day-to-day. The child does not need to sign anything or be present for most transactions.

When the grandchild reaches the age of majority — 18 in most states, 21 in a few — the account automatically becomes theirs. You lose control at that point. They can withdraw the money, close the account, or leave it open. There is no way to extend your control past that age, so if you want the money to last longer, you would need to set up a trust instead, which requires a lawyer and costs more upfront.

The two main types are UTMA accounts (Uniform Transfers to Minors Act) and UGMA accounts (Uniform Gifts to Minors Act). UTMA is newer and available in all 50 states; UGMA is older and not available in South Carolina. Most banks offer UTMA. Both work the same way from a practical standpoint — the difference is technical and matters mainly to lawyers and accountants.

What documents you need to bring

Bring the grandchild's Social Security number and a form of ID — a birth certificate is the standard. You will also need to show your own ID and proof of your relationship to the child. A birth certificate naming you as the grandparent works. If you are the legal guardian, bring the guardianship order or custody papers.

If you are not the legal guardian or custodian already, the parent or legal guardian may need to be present or sign a consent form. Banks vary on this. Some require it; others do not. Call the bank's customer service line before you go and ask: "I want to open a custodial account for my grandchild. What documents do I need, and does the parent need to be present?" Write down the answer so you have it in writing.

Bring more ID than you think you need. Banks are stricter about identity verification now, and having a passport, driver's license, and utility bill in your name speeds things up. For the grandchild, a birth certificate is almost always sufficient.

Tax implications and financial aid impact

Money in a custodial account is legally the grandchild's property, even though you control it. This matters for taxes. If the account earns interest or dividends, the grandchild may owe tax on that income, not you. The first $1,250 of unearned income (as of 2024) is usually tax-free for a dependent; income above that is taxed at the child's rate, which is typically lower than yours.

The bigger issue is financial aid. When the grandchild turns 18 and applies for college financial aid, the custodial account counts as their asset on the FAFSA (Free process for Federal Student Aid). Assets in the student's name reduce their aid package more than parental assets do. A grandparent's custodial account can cost the student thousands in aid. If college is the goal, talk to a financial planner or tax professional before opening the account — a trust or a 529 plan (education savings plan) might be better.

If you are not the legal guardian

If the parent is alive and has custody, you cannot unilaterally open a custodial account without their knowledge or consent. The parent has the legal right to control the child's finances. Some banks will let you open an account with parental permission; others will not.

Your options are to ask the parent to open the account with you as a co-owner, to gift money to the parent and let them save it for the child, or to open a regular savings account in your own name and designate the grandchild as a beneficiary (so they inherit it if you die). A beneficiary designation does not give them access while you are alive, but it avoids probate and gets the money to them quickly after your death.

Where to open the account

Most banks and credit unions offer custodial savings accounts. Call ahead and ask whether they do, because not all branches carry them. Online banks like Ally, Marcus, and Discover also offer custodial accounts, but you will need to complete the process online or by mail — you cannot walk into a branch.

Compare interest rates. Custodial savings accounts at online banks often pay higher interest than brick-and-mortar banks. The difference is small on small balances but adds up if you are saving a few thousand dollars. A rate of 4% versus 0.5% on $5,000 is $175 per year.

Check whether the bank has a minimum balance requirement. Some require $100 to $500 to open; others have no minimum. If you plan to start small, pick a bank with no minimum or a low one.

What happens if the parent objects

If you open a custodial account without the parent's consent and they find out, they can petition the court to have it closed or transferred to their control. The money belongs to the child legally, but the parent has the right to manage it until the child is an adult. Do not open an account secretly. If the parent objects, respect that boundary — the relationship with the parent matters more than the account.

If you want to help financially but the parent will not let you open a custodial account, offer to pay for specific things directly: tuition, medical bills, sports fees. Or gift money to the parent with the understanding that it goes toward the child's needs. These routes avoid conflict and give you some control over how the money is used.

Frequently Asked Questions

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

It depends on whether you are the legal guardian. If the parent has custody, most banks require parental consent or presence. If you are the legal guardian, you usually do not, but some banks ask anyway. Call the bank first and ask what their policy is.

What happens to the money when my grandchild turns 18?

The account becomes theirs automatically. You lose control and cannot tell them how to spend it. They can withdraw it all at once or leave it in the account. If you want to restrict access longer, you need a trust, which requires a lawyer.

Will a custodial account hurt my grandchild's chances of getting financial aid?

Yes, it can. Student assets on the FAFSA reduce aid more than parental assets do. If college is planned, talk to a financial planner about whether a 529 plan or trust would be better before opening a custodial account.

Can I open a custodial account online?

Yes, many online banks offer custodial accounts. You will complete the process entirely online or by mail. You will still need the grandchild's Social Security number and birth certificate, which you can usually upload as a photo or PDF.

What if I want to leave money to my grandchild but do not want them to have it at 18?

A custodial account will not work — the money transfers to them automatically. You would need a trust, which lets you set conditions like "they get the money at 25" or "only for education." A lawyer can set this up, and it costs more than a custodial account but gives you much more control.