You can open a savings account for a grandchild in your name, or set up a custodial account in their name with you as the legal guardian

The route you take depends on the child's age and what you want the account to do. If your grandchild is under 18, most banks offer two structures: a custodial account (also called a UGMA or UTMA account, depending on your state) where the money legally belongs to the child but you control it until they reach the age of majority, or a regular savings account in your own name where you straightforward set aside money for them. A custodial account has tax advantages if the balance grows, but the money becomes theirs to access at 18 or 21. A regular account stays yours, which gives you more control but no tax benefit.

The fastest option is usually opening an account in your own name at your current bank—you can do it online in minutes and deposit money when ready. If you want a custodial account, you will need the child's Social Security number, their date of birth, and your own identification. The process takes longer because the bank has to verify the child's identity and set up the legal structure, but most banks can complete it within a few business days.

Key Takeaways

  • A custodial account puts the money in your grandchild's name with you as the legal guardian, and the child gains control at 18 or 21 depending on your state.
  • A regular savings account in your own name is faster to open and gives you permanent control, but offers no tax advantage for the child's future.
  • You will need the child's Social Security number and date of birth to open a custodial account, plus your own ID.
  • Most banks allow you to open either type of account online, though custodial accounts may require a phone call or in-person visit to verify the child's identity.
  • Custodial accounts have annual gift tax reporting requirements if you contribute more than a certain amount per year, so check the current limit with your bank.

What you need to open a custodial account

Bring or provide your grandchild's Social Security number, their full legal name, and their date of birth. You will also need your own government-issued ID (driver's license or passport) and your Social Security number. Some banks ask for the child's address as well, which can be the same as yours.

If you are opening the account in person, bring these documents with you. If you are opening it online, you will enter the information into the bank's form and may be asked to verify your identity through a video call or by uploading a photo of your ID. The bank will then contact you by phone or email to confirm the child's information before finalizing the account.

The difference between UGMA and UTMA accounts

Both are custodial structures, but they differ in what assets they can hold and when the child gains control. A UGMA account (Uniform Gifts to Minors Act) holds cash, stocks, bonds, and mutual funds. An UTMA account (Uniform Transfers to Minors Act) can also hold real estate, artwork, and other property. Not all states offer both—some have moved to UTMA only—so ask your bank which one is available in your state.

The age at which the child takes control also varies by state. In most states it is 18, but some allow you to delay it to 21 if you set that up when you open the account. Check with your bank about your state's rules before you decide, because once the child reaches that age, the account is theirs and you have no further say in how it is used.

Tax reporting and annual limits

Money you put into a custodial account counts toward the annual gift tax limit. For 2024, you can give up to a certain amount per person per year without filing a gift tax return. If you exceed that amount, you must file a form with the IRS, though you may not owe tax. The limit changes yearly, so confirm the current amount with your bank or a tax professional before you make large deposits.

The account itself does not trigger taxes when you open it. Taxes arise only on earnings—interest or investment gains—once the account balance grows. A child with little or no other income may owe no tax on those earnings, which is one reason custodial accounts can be useful. Keep records of what you deposit and when, because you will need those records if the IRS ever asks about the gifts.

Opening an account in your own name instead

If you want to avoid the complexity of a custodial account, you can open a regular savings account in your own name and straightforward tell your family that the money is for your grandchild. This takes minutes at any bank—online or in person—and requires only your ID and Social Security number. You can deposit as much as you want, whenever you want, with no gift tax reporting.

The trade-off is that the money is legally yours. If you face a lawsuit, creditor claim, or need to explore for Medicaid, the account could be at risk. You also have no legal obligation to leave it to your grandchild—your will controls where it goes. For small amounts or short-term saving, this is often the simplest choice. For larger sums meant to grow over years, a custodial account offers more protection and tax clarity.

Where to open the account

You can open a custodial or regular savings account at any bank, credit union, or online bank. Large national banks like Chase, Bank of America, and Wells Fargo offer both types. Credit unions often have lower fees and may offer better interest rates, though they may require you to become a member first. Online banks like Ally, Marcus, and Discover typically have no monthly fees and higher interest rates, but you cannot deposit cash in person.

Compare the interest rate, monthly fees, and minimum balance requirements before you choose. For a custodial account, also ask whether the bank allows you to invest the money in stocks or mutual funds, or whether it is savings-only. Some banks restrict custodial accounts to savings products, while others let you build a more diverse portfolio. If you plan to add money regularly, check whether the bank has a mobile app or online portal that makes deposits straightforward.

What happens when your grandchild turns 18 or 21

On the date set by your state's law, the account automatically becomes your grandchild's to control. They can withdraw the money, change the account settings, or close it. You lose all legal authority at that point, even if you opened the account and funded it entirely. Some grandparents discuss this with their grandchildren in advance so there are no surprises, and some set expectations about how the money should be used.

If you want to keep control of money longer, a custodial account is not the right tool. You would need to set up a trust instead, which is more complex and usually requires a lawyer. For most families, a custodial account is a straightforward way to save for a grandchild while giving them ownership and a tax advantage as they grow.

Frequently Asked Questions

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

Yes. The account is governed by the laws of the state where you open it, not where your grandchild lives. You can open it in your home state even if your grandchild is across the country. Some banks may ask for the child's address, but it does not have to match yours.

What if I do not know my grandchild's Social Security number?

You will need it to open a custodial account. Ask the child's parent for it. If the child does not have one yet, they can explore for one through the Social Security Administration—the process takes a few weeks. You can open a regular account in your own name in the meantime and transfer it later.

Can I add money to the account after I open it?

Yes. You can deposit as much as you want, whenever you want. Keep in mind that large annual gifts may trigger gift tax reporting, so check the current annual limit with your bank or a tax professional if you plan to deposit more than a few thousand dollars per year.

What if I change my mind and want to close the custodial account?

You can close a custodial account before your grandchild reaches the age of majority, but the money still belongs to them legally. You cannot take it back for yourself. Once they reach 18 or 21, they own it outright and you have no authority to close it.

Do I need a lawyer to set up a custodial account?

No. Banks handle all the legal paperwork when you open the account. A lawyer is only necessary if you want to set up a trust or a more complex arrangement that gives you control beyond the age of majority.