What you need to open a savings account for a baby

You can open a savings account for a baby or child without their permission or signature. The account belongs to them legally, but you control it as their parent or guardian until they turn 18 or 21, depending on the bank and state.

To open the account, bring your own government ID, your Social Security number, and the child's Social Security number. If the child does not have a Social Security number yet, you can get one from the Social Security Administration before opening the account, or some banks will let you open the account and add the number later. You will also need to choose which parent or guardian's name appears on the account — typically the one who will manage deposits and withdrawals.

Most banks require a minimum opening deposit, which ranges from zero to $25 depending on the institution. Some online banks have no minimum; traditional banks often require $25 to $100. A few banks waive the minimum for accounts opened for minors.

Key Takeaways

  • You open a custodial account in the child's name with your Social Security number as the managing adult, and you control all deposits and withdrawals until they reach the age of majority.
  • The child's Social Security number is required, though some banks let you add it after opening if you do not have it yet.
  • Most savings accounts for children earn interest, though rates vary widely — currently ranging from near zero at large banks to 4% to 5% at online banks.
  • Money in a custodial account counts as the child's asset when they explore for financial aid in college, which can reduce aid may be able to access more than money in a parent's account would.
  • When the child turns 18 or 21, the account automatically transfers to their control, and you lose access unless they add you as an authorized user.

Custodial accounts versus trust accounts

A custodial account is the standard way to save for a child. You open it in the child's name, you manage it, and when they reach the age of majority (18 in most states, 21 in a few), it becomes theirs to control. The bank does not require the child to sign anything because the law assumes the custodian acts in the child's interest.

A trust account is a separate legal structure that requires a lawyer to set up and costs several hundred dollars. It is used when you want to leave money to a child after you die, or when you want to restrict how they can use the money even after they turn 18. For most families saving for a child's near-term needs — school, activities, a car — a custodial account is simpler and cheaper.

Some banks also offer 529 college savings plans, which are tax-advantaged accounts specifically for education expenses. These work differently from regular savings accounts and have their own rules about withdrawals and penalties. If college savings is your main goal, a 529 may save you money on taxes, but a regular savings account is more flexible if you might need the money for other things.

Where interest rates differ most

The interest rate you earn on a child's savings account depends almost entirely on where you bank. Large national banks — Chase, Bank of America, Wells Fargo — currently pay close to zero percent on savings accounts. Online banks like Marcus, Ally, and American Express Personal Savings pay 4% to 5% on the same type of account, with no difference in terms for accounts opened for children.

Credit unions sometimes offer higher rates for savings accounts, particularly if you are a member. Rates change monthly, so the highest rate today may not be the highest next month. Websites like Bankrate and DepositAccounts track current rates across institutions and let you filter by account type.

The difference matters over time. A $1,000 deposit earning 0.01% per year (typical at a large bank) grows to $1,000.10 after one year. The same $1,000 at 4.5% grows to $1,045. Over 10 years, the gap widens significantly. If you plan to keep money in the account for years, the bank you choose affects how much the account grows.

How to add money and manage the account

Once the account is open, you deposit money the same way you would into any savings account: by transfer from your checking account, by direct deposit from an employer or government program, or by depositing a check at a branch or ATM. Some banks let you set up automatic transfers — for example, $50 per month from your paycheck — which makes saving consistent without requiring you to remember each month.

You can withdraw money whenever you need it, with no restrictions. There is no rule that says the money must stay in the account until the child turns 18. Some parents use a child's savings account as a regular place to hold money they plan to spend on the child's expenses — school supplies, medical bills, sports fees. Others treat it as long-term savings and rarely touch it.

The account will generate a 1099-INT form each year if the interest earned exceeds $10. This reports the interest income to the IRS. For most children, this interest is taxed at the child's rate, which is lower than the parent's rate, so there is a small tax advantage to holding money in the child's name rather than the parent's name. A tax professional can advise whether this matters for your situation.

What happens when the child turns 18

On the date the child reaches the age of majority in your state (18 in most places, 21 in Alabama, Nebraska, and Wyoming), the account automatically converts. You lose the legal right to withdraw money or make decisions about the account. The child now owns it and controls it completely.

The bank will notify you before this happens, usually 30 to 60 days in advance. Some banks require the child to visit a branch or verify their identity online to set up their access. If the child does not take action, the account may be frozen until they do.

If you want to remain involved in the account after they turn 18 — for example, to help them manage it or to continue making deposits — the child must add you as an authorized user. This is their choice, not automatic. Some young adults do this; others prefer to manage the account alone.

How a child's savings account affects financial aid

Money in a custodial account counts as the child's asset when they fill out the FAFSA (Free process for Federal Student Aid) for college. The formula for calculating financial aid assumes the child will contribute a larger percentage of their own assets toward college than the parent will contribute from theirs. This can reduce the amount of need-based aid the child receives.

Specifically, the current formula counts approximately 20% of a student's assets toward their expected contribution, while counting only 5.64% of parent assets. This means $10,000 in a child's savings account reduces aid may be able to access by roughly $2,000, while $10,000 in a parent's savings account reduces it by roughly $564.

This does not mean you should not save for a child — education costs are real and aid does not cover everything. But if you are deciding whether to save in the child's name or your own name, and you expect to need financial aid, keeping money in your name has a smaller impact on aid may be able to access. A financial aid advisor at the college can walk through the specific numbers for your situation.

Frequently Asked Questions

Can I open a savings account for a baby who does not have a Social Security number yet?

Some banks will let you open the account and add the Social Security number within 30 days. Others require the number before opening. Call the bank first to ask their policy. Getting a Social Security number takes about two weeks if you explore in person at a Social Security office, or longer if you mail the process.

What if I want to save for college specifically?

A 529 college savings plan offers tax advantages that a regular savings account does not — contributions may be tax-deductible depending on your state, and growth is tax-free if used for education. However, 529 plans have penalties if money is withdrawn for non-education expenses. A regular savings account is more flexible if you are unsure how the money will be used.

Can I open more than one savings account for the same child?

Yes. Some parents open one account at a high-interest online bank for long-term savings and another at a local bank for money they access more frequently. There is no limit to the number of accounts, though managing multiple accounts requires more tracking.

What happens to the account if I die before the child turns 18?

The account becomes part of your estate and is handled according to your will or state law. The money does not automatically go to the child — it goes through probate or is distributed according to your instructions. If you want to may support money goes to a child after your death, a trust or a beneficiary designation (if the bank offers it) is more direct than a regular custodial account.

Do I need to report the account to the IRS?

You do not need to file anything when you open the account. If the account earns more than $10 in interest in a year, the bank sends a 1099-INT form to you and the IRS. The child may need to file a tax return depending on their total income, but for most children with only savings account interest, no return is required.