Yes, but the account structure depends on the child's age and your relationship

A grandparent can open a savings account for a grandchild, but you cannot put the account solely in the child's name if they are under 18. Banks require a parent or legal guardian to be the account owner or co-owner. The most common route is a custodial account, where you fund and manage the account until the child reaches the age of majority (usually 18 or 21, depending on your state and the account type).

If you want to open an account without involving the parents, you can open a regular savings account in your own name and use it to save money for the grandchild—but legally, that money belongs to you until you transfer it or specify it in your will. The difference matters because a custodial account is a formal arrangement that transfers ownership to the grandchild at a set age, whereas money in your account remains yours.

Some grandparents also add a grandchild as an authorized user on their own account, which lets the child access the money but keeps you in control. This is simpler than opening a new account but offers less structure for long-term saving.

Key Takeaways

  • A custodial account (UTMA or UGMA) is the formal way to save for a grandchild; you control it until they reach 18 or 21, then ownership transfers automatically.
  • You will need a parent or legal guardian to sign the paperwork if the child is under 18, even if you are funding the account.
  • Custodial accounts have tax advantages for smaller balances, but earnings above a certain amount are taxed at the child's rate rather than yours.
  • If you do not want parental involvement, you can save in your own account, but that money legally remains yours unless you change your will.
  • Different banks have different minimum balances and fees, so compare options before opening.

Custodial accounts: the standard structure for grandparent savings

A custodial account is a savings or investment account opened in the child's name, with you as the custodian. The two main types are UTMA (Uniform Transfers to Minors Act) and UGMA (Uniform Gifts to Minors Act). Both work the same way: you deposit money, manage the account, and the child owns the money but cannot touch it until they reach the age set by your state's law.

To open a custodial account, you will need the child's Social Security number, a parent or legal guardian's signature on the paperwork, and your own identification. Some banks allow you to open the account online if you have the parent's consent; others require an in-person visit. The parent does not have to contribute money—they are just authorizing the account structure.

When the child reaches the age of majority (18 in most states, 21 in a few), the account automatically becomes theirs. They can then withdraw the money, close it, or leave it open. You lose control at that point, so this structure works best if you trust the child's judgment or if the balance is modest enough that a poor decision will not derail their life.

Tax treatment and why it matters for larger balances

Custodial accounts have a tax advantage for smaller balances. In 2024, the first $1,450 of earnings in a custodial account is tax-free (this amount changes yearly). The next $1,450 is taxed at the child's rate, which is usually lower than yours. Earnings above $2,900 are taxed at the parents' rate, which erases the advantage.

This means a custodial account makes sense if you are saving a few thousand dollars and expect modest interest. If you are planning to deposit $50,000 or more, the tax benefit shrinks, and you may want to talk to a tax professional about alternatives like a 529 education savings plan (which has different rules and tax treatment) or simply saving in your own account.

The child does not file taxes on the account—you or the parents handle that. The bank will send a 1099 form if earnings exceed $10, and whoever claims the child as a dependent on their tax return typically reports the earnings.

Opening the account without parental involvement

If the parents do not want to be involved or are unreachable, you have two options: open a regular savings account in your own name, or wait until the child turns 18 and can open their own account.

A savings account in your name is straightforward—you need only your ID and Social Security number. You can deposit as much as you want, and the money is yours to manage. The downside is that the money legally belongs to you, not the child. If you die before transferring it, it becomes part of your estate and may go through probate. You can specify in your will that the money goes to the grandchild, but that takes time and may not happen the way you intended.

Some grandparents use this approach and simply tell the child (or the parents, if the relationship improves) that the account exists and is meant for them. Others keep it private. Either way, the account is yours until you formally transfer it or pass it on through your will.

Adding a grandchild as an authorized user

Some banks let you add a minor as an authorized user on your savings account. This gives the child a debit card or passbook access to the account, but you remain the owner and can close or freeze the account at any time. It is simpler than opening a custodial account because it requires no extra paperwork or parental signatures.

The trade-off is that there is no automatic transfer of ownership when the child turns 18. The account stays in your name, and the child loses access when you remove them or close the account. This works well if you want to teach a child about saving and spending without giving up control, but it is not a long-term savings vehicle the way a custodial account is.

Not all banks offer this option for minors, so ask your bank what they allow before you open an account.

What happens when the child turns 18

With a custodial account, the child automatically becomes the owner at the age of majority. The bank will send them paperwork explaining their new rights, and they can withdraw the money, close the account, or leave it open. You have no say in what they do at that point.

Some grandparents worry about this—what if the child spends the money on something frivolous? That risk is real, but it is also the point of a custodial account: the money is meant to be theirs, and at 18 they have the legal right to make their own choices. If you want more control, a regular savings account in your name is the better choice, even though it requires you to update your will.

If you have a regular savings account in your name, the child has no automatic claim to it. You can transfer money to them, add them as a beneficiary, or leave it to them in your will—but none of that happens automatically.

Comparing banks and account features

Different banks have different rules for custodial accounts. Some have no minimum balance; others require $100 or $500 to open. Interest rates vary widely—some savings accounts pay less than 0.01% annually, while others pay 4% or higher. A few banks do not offer custodial accounts at all.

Before opening an account, compare the interest rate, any monthly fees, the minimum balance requirement, and whether you can deposit money online or only in person. Online banks often have higher interest rates and lower fees than traditional banks, but you cannot walk into a branch if you have questions.

If the child is old enough, some banks let you open a teen checking account with parental consent, which offers more features than a savings account. These accounts sometimes come with a debit card and online banking access, which can help teach money management skills.

Frequently Asked Questions

Do I need the parents' permission to open a custodial account?

Yes. A parent or legal guardian must sign the paperwork authorizing the account, even if you are funding it entirely. If the parents refuse or are unavailable, you cannot open a custodial account. You can open a regular savings account in your own name instead.

What if the parents and I disagree about how the money should be used?

Once the custodial account is open, the money belongs to the child, not to you or the parents. The parents cannot withdraw it or redirect it without the child's consent. If you are concerned about how the money will be used, discuss it with the parents before opening the account, or save the money in your own name instead.

Can I withdraw money from a custodial account if I need it?

No. Money in a custodial account belongs to the child, and you cannot withdraw it for your own use. Some states allow withdrawals for the child's benefit (education, medical care, living expenses), but the rules vary. Check your state's law or ask the bank before opening the account.

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

The account remains in the child's name, and a parent or legal guardian takes over as custodian. The money stays there until the child reaches the age of majority. If there is no parent or guardian, the court will appoint one.

Is a 529 plan better than a custodial savings account?

A 529 plan is designed for education expenses and has different tax rules and restrictions. If you are saving specifically for college or K-12 tuition, a 529 may offer better tax treatment. If you are saving for general purposes or the child may not go to college, a custodial savings account is simpler and more flexible.