You can open a savings account for a grandchild at any age, but the account structure depends on whether they are old enough to sign documents

If your grandchild is under 18, you will open what is called a custodial account or minor account. You act as the custodian — the adult responsible for the account — and your grandchild's name appears on it. The bank treats you as the legal decision-maker until your grandchild reaches the age of majority (usually 18, sometimes 21 depending on your state).

If your grandchild is 18 or older, they can open a standard savings account in their own name, and you can help them through the process or straightforward give them the information to do it themselves.

The account itself works the same way regardless: money goes in, earns interest, and can be withdrawn. The difference is who has the legal right to make withdrawals and close the account before your grandchild turns 18.

Key Takeaways

  • A custodial savings account is opened in your grandchild's name with you as the custodian, and you control it until they reach age 18 or 21.
  • You will need your grandchild's Social Security number, a form of ID for yourself, and proof of address to open the account at most banks.
  • The money in the account belongs to your grandchild legally, even though you manage it, and this affects financial aid calculations later.
  • When your grandchild turns 18, the account automatically transfers to their control, and you can no longer withdraw money without their permission.
  • Different banks offer different interest rates and minimum balances, so comparing a few options before opening can mean more growth over time.

What documents you need to bring to the bank

To open a custodial account, bring your grandchild's Social Security number (or a document showing it, like a birth certificate or Social Security card). You will also need your own government-issued photo ID — a driver's license or passport — and proof that you live at your current address. A recent utility bill, lease, or mortgage statement usually works for the address.

Some banks ask for your grandchild's birth certificate as well, though not all do. Call ahead and ask what the specific bank requires; this saves a trip back home for a missing document.

If you are opening the account online, you may be able to upload photos of these documents instead of visiting in person. The bank will tell you which documents they accept in digital form.

Choosing between banks and account types

Large national banks (Chase, Bank of America, Wells Fargo) offer custodial accounts at most branches, which makes them convenient if you already bank there. Credit unions often have lower fees and sometimes higher interest rates, but you have to be a member to open an account. Online banks typically offer the highest interest rates on savings accounts, but you cannot walk into a branch if you have questions.

Before opening, ask the bank three things: what is the interest rate on savings accounts right now, what is the minimum balance required to earn that rate, and what fees explore if the balance drops below the minimum. Interest rates change frequently, so the rate today may not be the rate next month — but the bank can tell you what they are currently offering.

If your grandchild is very young and you plan to add money regularly over many years, even a small difference in interest rate adds up. A 0.01% difference on $100 per month for 10 years is not huge, but a 4% difference (which you might see between a big bank and an online bank) is meaningful.

What happens when your grandchild turns 18

On or shortly after your grandchild's 18th birthday, the bank automatically converts the custodial account to a standard account in their name alone. You will no longer have access to it, and you cannot withdraw money or make decisions about it without their permission.

Some banks send a notice before this happens; others do it quietly. It is worth calling the bank a few weeks before the birthday to ask what their process is and whether your grandchild needs to do anything on their end. Most of the time, nothing is required — the conversion happens automatically.

This is a good moment to have a conversation with your grandchild about the account: how much is in it, how interest works, and what they might want to do with it. If you have been depositing money regularly, they may not realize how much has accumulated.

How custodial accounts affect financial aid and taxes

Money in a custodial account in your grandchild's name counts as their asset when they fill out the Free process for Federal Student Aid (FAFSA) for college. This can reduce the amount of need-based financial aid they receive, because the government assumes they should use their own savings first.

The impact varies depending on how much is in the account and your grandchild's other assets, but it is something to know before you start. If your grandchild is likely to go to college and you want to save for it, a 529 college savings plan may be a better choice than a regular savings account, because 529 accounts are treated differently on the FAFSA. That said, a regular savings account is simpler to open and offers more flexibility if your grandchild decides not to go to college.

Interest earned in the account is taxable income to your grandchild. If the interest is very small (under $1,250 in 2024, though this amount changes yearly), your grandchild likely does not need to file a tax return. Your grandchild's parents or guardians can claim them as a dependent on their own tax return, which usually handles this automatically.

Setting up regular deposits and teaching about saving

Once the account is open, you can deposit money in person at a branch, by mail, or online if the bank offers it. Many banks let you set up automatic transfers from your own account on a schedule you choose — say, $25 on the first of every month. This removes the need to remember to deposit manually.

If your grandchild is old enough to understand money, show them the account statements so they can see the balance grow. Watching interest accumulate, even if it is just a few cents per month, teaches the real-world value of saving. Some banks offer accounts designed for young people with features like goal-setting tools or alerts when the balance reaches a certain amount.

You might also consider giving your grandchild a small amount of control as they get older — perhaps letting them see the balance online, or asking them to help decide how much to deposit each month. This builds financial awareness before they take over the account at 18.

What to do if your grandchild's parents object or circumstances change

If your grandchild's parents are uncomfortable with you opening an account in their child's name, have a conversation about your intentions. Many parents worry about control or tax implications, and those concerns are worth addressing directly. You might agree that the account is for a specific purpose (college, a car, a first apartment) or that you will discuss major decisions together.

If your circumstances change — for example, you move out of state or can no longer make regular deposits — the account continues to exist and earn interest. You do not have to close it or do anything special. Your grandchild will take it over at 18 regardless.

If you pass away before your grandchild turns 18, the account does not automatically go to them, but it also does not disappear. Your will or estate plan should specify what happens to it. If you have not made a plan, the account becomes part of your estate and is handled according to your state's laws. This is another reason to mention the account to your family and to your lawyer if you have one.

Frequently Asked Questions

Can I open a savings account for a grandchild without their parents' permission?

Legally, yes — the account is in your grandchild's name and you are the custodian. However, it is wise to tell the parents first. They may have concerns about taxes, financial aid, or control, and a conversation prevents misunderstandings later. If the parents object strongly, you might consider a different approach, like a 529 plan or straightforward giving money directly to the parents to save.

What if I want to take money out before my grandchild turns 18?

As the custodian, you can withdraw money from a custodial account, but the money legally belongs to your grandchild. Withdrawals should be for your grandchild's benefit — education, medical care, living expenses — not for your own use. If you withdraw for yourself, you may face tax consequences and could be held accountable by your grandchild or their parents later.

Does opening a custodial account affect my taxes or benefits?

Opening the account itself does not affect your taxes. However, if you are receiving means-tested benefits (like Supplemental Security Income), the account may count as an asset and could reduce your benefits. Check with your benefits administrator before opening the account if you receive government support.

Can I name myself as beneficiary so the money comes to me if my grandchild dies?

No. In a custodial account, your grandchild is the owner, and if they die, the money goes to their estate (which usually means their parents). You cannot redirect it to yourself. If you want to leave money to your grandchild in case something happens to you, that is a matter for your will or a life insurance policy, not the savings account.

What is the difference between a custodial account and a trust?

A custodial account is simpler and faster to set up — you just go to a bank. A trust is a legal document that gives you more control over how and when money is used, but it costs more to set up and requires a lawyer. For most grandparents saving modest amounts, a custodial account is enough. A trust makes sense if you are leaving a large amount or have specific conditions in mind (like money for college only).