You can open a savings account for a grandchild, but the account type depends on their age and what you want to control

If your grandchild is under 18, you cannot open an account in their name alone — they do not have the legal capacity to sign contracts. Instead, you have two real options: a custodial account (where you are the legal custodian until they reach the age of majority, usually 18 or 21) or a joint account (where both names appear and either person can withdraw). A custodial account gives you full control and the account transfers to them automatically when they come of age. A joint account is simpler to set up but gives them access to the money when ready, even if they are young.

If your grandchild is 18 or older, they can open their own account and you can be added as an authorized user or co-owner if the bank allows it, though this is less common. Most grandparents in this situation straightforward help their adult grandchild open an account in their own name.

Key Takeaways

  • A custodial account is held in your name as custodian until your grandchild reaches the age of majority (18 or 21, depending on your state), then transfers to them automatically.
  • A joint account has both names on it from the start and either person can withdraw money, so your grandchild can access funds even if they are young.
  • You will need your grandchild's Social Security number, birth date, and address to open either type of account.
  • Most banks and credit unions offer custodial savings accounts, though some have minimum balances or monthly fees that vary by institution.
  • The account earnings are taxed to your grandchild, not to you, which can mean lower taxes on the first $1,250 of interest per year (the exact amount changes annually).

Custodial accounts: what happens when they turn 18

A custodial account is registered with your state's Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) — the specific law varies by state, but the concept is the same. You open the account in your name as custodian, with your grandchild named as the beneficiary. You control all deposits, withdrawals, and investment decisions while they are a minor.

When your grandchild reaches the age of majority — 18 in most states, 21 in a few — the account automatically becomes theirs. You lose all control at that point. They can withdraw the entire balance, close the account, or leave it open. There is no way to extend your control past the age of majority or to set conditions on how they use the money. If you want restrictions on how the money is used after they turn 18, a custodial account will not give you that.

The account is considered their asset for financial aid purposes, which can reduce their may be able to access for student loans or grants. If that matters to you, discuss it with a financial planner before opening the account.

Joint accounts: when ready access, shared responsibility

A joint account has both your name and your grandchild's name on the account from the start. Either of you can deposit or withdraw money without permission from the other. This is simpler to set up — you just walk into a bank with your grandchild (or their birth certificate if they are very young) and open it like a regular savings account, except you list two owners.

The downside is that your grandchild can withdraw the entire balance at any time, even if they are young and you did not intend for them to have access yet. Some grandparents use joint accounts specifically because they want their grandchild to learn to manage money, but others find this risk unacceptable. There is also no automatic transfer of ownership — if you die, the account becomes part of your estate and may go through probate, depending on your state and how the account is titled.

Joint accounts are also considered the grandchild's asset for financial aid purposes, just like custodial accounts.

What you need to bring to the bank

Bring your own government-issued photo ID (driver's license or passport) and your Social Security number. You will also need your grandchild's Social Security number, date of birth, and current address. If your grandchild is old enough to come with you, bring them and their ID. If they are very young, bring their birth certificate.

Some banks ask for proof of guardianship or custody if you are not the parent, so bring any court documents that show you have legal authority to act on their behalf. If you are the grandparent but not the legal guardian, call the bank ahead of time and ask what they need — policies vary. A few banks will not open a custodial account for a grandparent without guardianship papers, though most will.

Ask the bank whether there is a minimum opening deposit and whether there are monthly maintenance fees. These vary widely — some banks have no minimum and no fee, while others require $25 or more to open and charge $5 to $10 per month if the balance drops below a certain level.

Tax treatment and the kiddie tax

The interest or dividends earned in the account are taxed to your grandchild, not to you. This is usually a good thing because their tax rate is lower than yours. However, there is a rule called the kiddie tax that applies to children under 18 (or 24 if they are a full-time student with unearned income). The first $1,250 of unearned income per year is tax-free. The next $1,250 is taxed at the child's rate. Anything above $2,500 is taxed at your rate.

These dollar amounts change each year, so check the IRS website or ask your tax preparer for the current year's thresholds. For most grandchildren with modest savings, the kiddie tax will not matter because the account will not earn enough to trigger it. But if you are depositing large amounts or the account grows significantly, it is worth understanding.

Comparing banks and credit unions

Most major banks (Chase, Bank of America, Wells Fargo, Citibank) offer custodial savings accounts. Credit unions often do too, and sometimes with lower fees. Online banks like Ally, Marcus, and Discover also offer custodial accounts, usually with no monthly fees and no minimum balance, though the interest rate on savings accounts is generally low across all institutions right now.

Call or visit the bank's website and search for "custodial savings account" or "UTMA account" to see what they offer. Ask about the interest rate, monthly fees, minimum balance requirements, and whether there are any restrictions on how often you can withdraw money. Some banks limit withdrawals to a certain number per month, though this is less common for savings accounts than for money market accounts.

If your grandchild is 18 or older and opening their own account, the same comparison applies — look at interest rates, fees, and minimum balances. You can ask to be added as an authorized user on their account at some banks, which gives you the ability to see the balance and make deposits but not to withdraw without their permission, though not all banks offer this option.

What happens if you die before they turn 18

If you are the custodian and you die, the account does not automatically go to your grandchild's parent. Instead, the bank will require the parent (or a court-appointed guardian) to provide a death certificate and take over as custodian. The account stays in custodial status until your grandchild reaches the age of majority. There is no probate delay — the parent can usually take over within a few weeks of providing the death certificate.

If you have a joint account and you die, the account typically passes to your grandchild outside of probate (this is called right of survivorship, and it is automatic on most joint accounts). However, the account is still considered their asset for tax and financial aid purposes, and if your grandchild is very young, their parent will need to manage it on their behalf until they turn 18.

If you want the money to go somewhere other than your grandchild if you die, or if you want to set conditions on how it is used, you will need to handle that through your will or trust, not through the account itself. Talk to an estate planning attorney if this is a concern.

Frequently Asked Questions

Can I open a custodial account if I am not the legal guardian?

Most banks will open a custodial account for a grandparent without guardianship papers, but some require them. Call the bank ahead of time and ask. If they require guardianship, you will need a court order showing you have legal custody or guardianship of the child. If you do not have that, a joint account is usually your only option.

What is the difference between UTMA and UGMA accounts?

UTMA (Uniform Transfers to Minors Act) and UGMA (Uniform Gifts to Minors Act) are state laws that govern custodial accounts. UTMA is newer and allows more types of assets (real estate, for example), while UGMA is older and more limited. Your state uses one or the other, and the bank will handle the paperwork — you just need to know the account is custodial.

Can I withdraw money from a custodial account for my grandchild's expenses?

Yes, as the custodian you can withdraw money for your grandchild's benefit — education, medical care, living expenses. You cannot withdraw it for your own use. The IRS has rules about what counts as a legitimate expense, so if you are withdrawing large amounts, keep records of what the money was used for.

Does opening a custodial account affect my grandchild's Social Security benefits?

If your grandchild receives SSI (Supplemental Security Income) or other means-tested benefits, a custodial account can reduce or eliminate those benefits because it counts as an asset. If your grandchild receives benefits, talk to a benefits counselor before opening any account in their name.

Can I change the beneficiary of a custodial account?

No. Once you name your grandchild as the beneficiary, they are the only person who can receive the money when they turn 18. You cannot change it to a different grandchild or redirect it to yourself. If you want to save for multiple grandchildren, you need to open separate accounts for each one.