Yes, you can open a savings account for your nephew, but the rules depend on his age

You can set up a savings account in your nephew's name at most banks and credit unions. The account belongs to him legally, even though you control it while he is a minor. The main constraint is age: banks have different rules for children under 13, teenagers aged 13 to 17, and young adults 18 and older.

If your nephew is under 13, you will need to open a custodial account (also called a minor account or youth account). You become the custodian, meaning you manage the money until he reaches the age of majority—usually 18 or 21, depending on your state and the bank's terms. If he is 13 or older, many banks let him open an account himself with your permission, though you may still need to be a joint owner or co-signer.

The account is his property, not yours. Any money in it belongs to him, and he will owe taxes on any interest it earns. You cannot use the money for your own expenses, and if you do, that is legally considered theft from his account.

Key Takeaways

  • Children under 13 need a custodial account with an adult custodian; teenagers 13 and older can often open accounts themselves with parental permission.
  • You will need your nephew's Social Security number and proof of his identity and address to open any account.
  • Money in the account belongs to your nephew, not to you, and you cannot withdraw it for your own use.
  • The account transfers to your nephew's full control at the age of majority, which is 18 in most states but 21 in a few.
  • Custodial accounts may affect his financial aid may be able to access later, since colleges count student-owned assets more heavily than parent-owned ones.

What you need to open a custodial account for a child under 13

Most banks require the same documents whether you are opening an account for yourself or for a minor. You will need your nephew's Social Security number, a government-issued ID (usually a birth certificate for young children), and proof of his address. The address proof can be a recent utility bill, lease, or school enrollment letter showing his name and your address.

You will also need to provide your own ID and Social Security number, since you are the custodian. Some banks ask for a second form of ID from you—a driver's license plus a passport, for example. A few banks require you to open the account in person; most now let you do it online or by mail.

The account will be registered as "Your Name, Custodian for [Nephew's Name]" or "[Nephew's Name], under the Uniform Transfers to Minors Act" (UTMA). This legal language tells the bank that the money belongs to your nephew but you control it until he comes of age.

How custodial accounts work once they are open

You can deposit money, withdraw money, and manage the account exactly as you would your own—but only for your nephew's benefit. The law does not define "benefit" narrowly. It can mean education, medical care, housing, or general support. It does not mean you can use the money to pay your own rent or credit card bill.

Your nephew can see the account statements and balance if he asks, though you are not required to show him until he reaches a certain age (this varies by bank and state). Many custodians do show older children their balances to teach them about saving.

When your nephew reaches the age of majority—18 in most states, 21 in Alabama, Nebraska, and Wyoming—the account becomes his to control. You lose all authority over it. He can withdraw the money, close the account, or leave it open. This transfer happens automatically; you do not need to do anything, but you should tell him it is coming.

Opening an account for a teenager aged 13 to 17

Many banks offer teen accounts that let a young person open and manage the account with a parent or guardian as a co-owner or co-signer. The rules vary widely. Some banks let the teenager be the primary account holder with a parent watching from the side; others make the parent the primary owner and the teenager a secondary user.

A teen account is not the same as a custodial account. In a custodial account, you own the money until he comes of age. In a teen account, he usually owns the money from the start, and you have oversight rights. This matters for taxes and for financial aid later.

Ask the bank directly whether they offer teen accounts and what the setup looks like. Some banks—including many online banks—do not have a teen account product and will ask you to open a custodial account instead, even if your nephew is 16.

Tax and financial aid consequences you should know about

Any interest your nephew's account earns is his taxable income. If the account earns less than roughly $1,300 in a year (the exact threshold changes annually), he owes no federal tax on it. Above that, he files a tax return and pays tax at his rate, which is usually lower than yours. You do not report the interest on your own return.

Custodial accounts can reduce the amount of financial aid your nephew receives in college. Schools count money in the student's own name more heavily than money in a parent's name when calculating how much the family can afford to pay. If your nephew has $10,000 in a custodial account in his name, the school may expect him to use some of it for college costs before offering aid. Money in your name does not count against him the same way.

This is not a reason to avoid opening the account—it is a reason to know the tradeoff. If you are saving for his college specifically, talk to a tax professional about whether a 529 plan (a college savings plan) might work better for your situation.

What happens if you die before your nephew comes of age

If you are the custodian and you die, the account does not disappear. The money stays in the account and belongs to your nephew. However, someone else will need to take over as custodian until he reaches the age of majority. You can name a successor custodian in your will, or the court will appoint one.

If you do not name a successor and no one steps in, the account may be frozen until a court appoints a new custodian. This can take weeks or months. To avoid this, name a successor custodian when you open the account, or update your will to name one. Most banks let you do this at account opening or later by request.

Frequently Asked Questions

Can I open a savings account for my nephew without his parents' permission?

No. If your nephew is under 18, you need at least one parent's or legal guardian's permission. If he is 18 or older, you do not need permission, but he will need to be involved in opening the account since it is his legal property. Some banks require both parents to sign off on a custodial account; check with your bank.

What if I want to give the money to my nephew but do not want to open a bank account?

You can give cash or a check directly to his parents, and they can deposit it into an account they control. You can also give him a gift card or open a 529 college savings plan in his name. A 529 has tax advantages if the money is for education, but the money must be used for school or the account owner pays a penalty on the earnings.

Can my nephew access the money before he turns 18?

Only with your permission. In a custodial account, you control all withdrawals. Some banks let you set up rules—for example, allowing him to withdraw money for specific purposes without asking you first—but you set those rules. Once he reaches the age of majority, he can withdraw everything without asking.

Will opening a custodial account affect my taxes?

No. The interest and earnings in the account are your nephew's income, not yours, so you do not report them on your tax return. You also cannot claim a tax deduction for money you deposit into the account. It is a gift, not a charitable contribution.

What is the difference between a custodial account and being a joint owner?

In a custodial account, the money belongs to your nephew from the start, and you manage it until he comes of age. In a joint account, you both own the money equally, and either of you can withdraw it all. A joint account is simpler to set up but riskier—if your nephew's creditors come after him, they can seize the whole account, including your money. Custodial accounts protect your money from his debts.