What you need to open an account in your grandchild's name

A savings account for a grandchild requires either a parent or legal guardian to co-own the account with you, or to open it on the child's behalf. Banks will not open an account in a minor's name alone. The account holder who is 18 or older becomes the custodian — the person legally responsible for the money until the child reaches the age of majority (18 or 21, depending on your state).

You will need the child's Social Security number, date of birth, and address. If you are the custodian, you will need your own ID, Social Security number, and proof of address. Some banks also ask for the other parent's information if they have custody rights, even if they are not opening the account. Call the bank before you go in to confirm what documents they require — requirements vary by institution.

The account can be opened in person at a branch, by phone, or online, depending on the bank. Some banks allow you to open a custodial account online without visiting a branch; others require at least one in-person visit. If the child's parent is the custodian, they can often open the account without you present, though you can contribute money to it afterward.

Key Takeaways

  • A parent or legal guardian must be the custodian on the account; the child cannot own it alone until they reach 18 or 21.
  • You will need the child's Social Security number and date of birth, plus ID and proof of address for the adult custodian.
  • Custodial accounts are held in the child's name but controlled by the custodian until the child reaches the age of majority in your state.
  • Money you contribute to a custodial account belongs to the child and may affect their tax liability or financial aid may be able to access later.
  • When the child reaches the age of majority, the account transfers to their control — you cannot prevent them from withdrawing the money.

Custodial accounts versus accounts you own separately

A custodial account is held in the child's name but controlled by the custodian (usually a parent or grandparent) until the child turns 18 or 21. The money belongs to the child from the moment it is deposited. This matters for taxes: any interest or earnings above a certain threshold are taxed at the child's rate, not yours, which is usually lower. For 2024, the first $1,450 of unearned income is tax-free for a dependent child; income above that is taxed at the child's rate until they reach a higher threshold.

An alternative is to open a savings account in your own name and keep the money separate, with the intention of giving it to the child later. This account belongs to you legally, so you control it completely and can use it for other purposes if needed. The interest is taxed at your rate. However, money in your name does not count toward the child's financial aid may be able to access, which can be an advantage if the child later pursues higher education.

Most grandparents choose a custodial account because it teaches the child about saving and because the tax treatment is more efficient. The trade-off is that once the child reaches the age of majority, the money is theirs to withdraw — you cannot prevent it or require them to use it for education or any other purpose.

Types of custodial accounts and which one to choose

The two main types are UGMA accounts (Uniform Gifts to Minors Act) and UTMA accounts (Uniform Transfers to Minors Act). Both work the same way from a savings perspective: the custodian controls the account until the child reaches the age of majority. The difference is what can be deposited. UGMA accounts hold cash, securities, and some other assets. UTMA accounts are broader and can hold real estate, artwork, and other property. Most banks offer UTMA accounts because they are more flexible.

For a straightforward savings account, either type works. Ask the bank which one they offer — most will default to UTMA. The age at which the child takes control varies by state: some states use 18, others use 21. Check your state's law before opening the account so you know when you will need to transfer control. A few states allow you to delay transfer until age 25 if you choose, but you must make that election when you open the account.

Some banks also offer 529 college savings plans, which are tax-advantaged accounts specifically for education expenses. These are separate from regular savings accounts and have different rules about withdrawals and taxes. If your goal is to save for college specifically, a 529 may be more efficient, but a regular custodial savings account is simpler if you want the child to have flexibility in how they use the money.

How to fund the account and what happens to the money

You can deposit money into a custodial account the same way you would any other savings account: in person at a branch, by check, by electronic transfer, or sometimes by mobile deposit. There is no limit on how much you can contribute per year, though very large gifts may have tax implications for you (the federal gift tax limit is $18,000 per person per year for 2024, but most grandparents do not reach this amount). Consult a tax professional if you plan to contribute more than $20,000 in a single year.

Once the money is in the account, it earns interest at whatever rate the bank offers. Custodial savings accounts typically earn less interest than high-yield savings accounts, so if you want the money to grow faster, you may want to compare rates across banks. Some banks offer higher rates on custodial accounts if you maintain a minimum balance or set up automatic deposits.

The money stays in the account and grows until the child reaches the age of majority. At that point, the account automatically transfers to the child's control. You will receive notice from the bank before this happens, usually 30 to 60 days in advance. Once the transfer is complete, the child can withdraw the money, close the account, or keep it open and continue saving.

Setting up automatic deposits and teaching the child about saving

Many banks allow you to set up automatic monthly or annual deposits to the account. This is useful if you want to contribute a fixed amount regularly — for example, $50 per month or $500 per year on the child's birthday. Automatic deposits may support the account grows steadily without requiring you to remember to make each transfer.

Some custodial accounts come with a debit card or check-writing privileges, which allows the child to make withdrawals once they are old enough to understand how to use them responsibly. This can be a teaching tool: the child sees the balance grow, understands that withdrawals reduce it, and learns the basics of managing money. However, you as the custodian retain the right to deny withdrawals if you believe they are inappropriate, though this right becomes harder to enforce as the child gets older.

If you want the account to serve as a savings lesson, consider discussing with the child's parent how to involve the child in the account. Some families have the child contribute their own money (from allowance or gifts) alongside the grandparent's contributions. Others wait until the child is a teenager before explaining the account's purpose and balance. There is no single right approach — it depends on the child's age and your family's values.

What happens when the child reaches the age of majority

When your state's age of majority arrives (usually 18 or 21), the custodial account automatically converts to a regular account in the child's name. You are no longer the custodian and have no legal control over the money. The child can withdraw it all, spend it, or leave it in the account. You cannot prevent any of these outcomes.

The bank will send you and the child notice of the transfer, typically 30 to 60 days before it happens. This is a good time to have a conversation with the child about the money's purpose and your hopes for how they will use it. However, understand that once the account is theirs, the decision is theirs to make.

If you want to may support the money is used for a specific purpose (like education), a custodial account is not the right tool. A trust, set up with a lawyer, gives you more control over how and when the money can be used after the child reaches adulthood. Trusts are more expensive to set up and maintain, but they are the only way to restrict the child's access to the money beyond the age of majority.

Comparing banks and account features

Not all banks offer custodial savings accounts, and those that do vary in interest rates, fees, and minimum balances. Large national banks like Chase, Bank of America, and Wells Fargo offer custodial accounts but often pay very low interest rates (sometimes less than 0.01% annually). Online banks like Ally, Marcus, and Discover typically offer higher rates on custodial savings accounts, sometimes 4% or higher, though rates change frequently.

Before opening an account, compare the interest rate, any monthly fees, minimum balance requirements, and whether the bank allows automatic deposits. Some banks waive fees for custodial accounts or offer higher rates if you set up automatic monthly contributions. Check the bank's website or call to confirm they offer custodial accounts — not all do.

Once you choose a bank, the opening process is straightforward. You will provide the child's and custodian's information, sign documents confirming the custodial arrangement, and make an initial deposit. The account is usually active within one to three business days.

Frequently Asked Questions

Can I open a custodial account if I am not the child's parent?

Yes. A grandparent, aunt, uncle, or any other adult can be the custodian. However, if the child has two living parents with custody rights, some banks require consent from both parents before opening the account. Call the bank first to ask about their policy.

What happens to the account if the custodian dies?

The account belongs to the child, so it does not go through your estate. However, the child may not be able to access it until they reach the age of majority, depending on the bank's policy. Name a successor custodian when you open the account if possible, so someone else can manage it if you die before the child reaches adulthood.

Can the child's parent withdraw money from the custodial account?

Only the custodian can withdraw money. If the child's parent is not the custodian, they cannot access the account without your permission. This is one reason some families make the child's parent the custodian instead of the grandparent — it gives the parent control over day-to-day decisions about the money.

Does a custodial account affect the child's ability to get financial aid for college?

Yes. Custodial accounts are counted as the child's assets when calculating financial aid may be able to access. Money in the child's name reduces the amount of aid they may receive. Money in your name (in a separate account you own) does not count toward their aid calculation. If college funding is your main goal, ask a financial aid advisor whether a 529 plan or a regular savings account in your name might be better.

Can I change the custodian after I open the account?

This depends on the bank and the type of account. Some banks allow you to name a successor custodian when you open the account, or to change the custodian later if you provide written request. Others do not allow changes. Ask the bank about their policy before opening the account, and if you want the option to change custodians, choose a bank that allows it.