Yes, you can open a savings account for a baby, and you have several account types to choose from

You can open a savings account in your baby's name at most banks and credit unions. The account will be held in trust by you as the parent or legal guardian until your child turns 18 or 21, depending on your state and the bank's rules. You'll need your baby's Social Security number, a form of ID for yourself, and proof of address. Some banks let you open the account online; others require you to visit a branch in person.

The main decision is what type of account to use. A custodial savings account is the simplest option — money stays in your control, earns interest, and transfers to your child when they reach the age of majority. A 529 college savings plan offers tax advantages if you're saving specifically for education. A Coverdell Education Savings Account is another education-focused option with different contribution limits and tax rules. Each has different rules about who can contribute, how much, and what the money can be used for.

Key Takeaways

  • You can open a custodial savings account at most banks and credit unions using your baby's Social Security number and your own ID.
  • A custodial account is the simplest choice if you just want to save money for your child without tax-advantaged restrictions.
  • 529 plans and Coverdell accounts offer tax benefits for education savings but limit how the money can be spent.
  • Money in a custodial account becomes your child's legal property when they reach 18 or 21, and they can spend it however they want.
  • Some banks offer higher interest rates on children's savings accounts, though rates vary widely by institution.

What you need to open a custodial savings account

To open a custodial account, bring your baby's Social Security number and your own government-issued ID to the bank or credit union. You'll also need proof of your current address — a utility bill, lease, or recent bank statement usually works. Some banks accept an online application if you have a camera or phone to photograph your ID; others require an in-person visit.

The account will be registered as "[Your Name] as custodian for [Baby's Name]" or similar language. You are the account owner and decision-maker while your child is a minor. The bank will ask for your Social Security number and may run a background check as part of their standard account-opening process. This is normal and does not affect your credit score.

If you don't have your baby's Social Security number yet, you can request one from the Social Security Administration online or by mail. The process takes one to two weeks. Some hospitals offer to apply for a Social Security number at birth; if yours did, you should receive the card in the mail within a few weeks.

Custodial accounts versus education-focused savings plans

A custodial savings account is flexible. You can deposit money whenever you want, withdraw it whenever you want, and use it for anything — school supplies, sports equipment, a car, or anything else. The money earns interest, though rates are typically low (often under 1 percent annually, though some online banks offer higher rates). When your child turns 18 or 21, the account becomes theirs, and they can spend it however they choose.

A 529 plan is a state-sponsored investment account designed for education costs. You can contribute more money per year than you can to other accounts, and the earnings grow tax-free as long as the money is used for may have access to education expenses — tuition, room and board, books, computers, and some student loan repayment. If you withdraw money for non-education purposes, you pay income tax on the earnings plus a 10 percent penalty. The account can be transferred to a sibling if your child doesn't use all the money.

A Coverdell Education Savings Account has lower annual contribution limits than a 529 (up to $2,000 per year) but more flexibility in what counts as an education expense. It also covers K-12 private school tuition, not just college. Like a 529, non-education withdrawals trigger taxes and penalties on earnings.

If you're unsure whether your child will attend college, or if you want to save for multiple purposes, a custodial account is simpler. If you're confident about education savings and want tax advantages, a 529 plan is usually the better choice.

How interest rates and fees work on children's accounts

Interest rates on children's savings accounts vary widely. Traditional banks often offer rates between 0.01 and 0.5 percent annually. Online banks sometimes offer higher rates — 4 to 5 percent is possible, though these rates change frequently and may require a minimum balance or regular deposits. Credit unions often offer competitive rates to members. Check the current rates at several institutions before opening an account, because the difference between 0.01 percent and 4 percent compounds significantly over years.

Most banks do not charge monthly fees on children's savings accounts, but some do if the balance falls below a minimum (often $100 to $500). Read the account agreement before opening to confirm there are no surprise fees. Some accounts waive fees if you set up automatic deposits or maintain a certain balance.

Interest earned on the account is taxable income to your child. If your child earns less than a certain amount per year (the standard deduction for dependents, which varies by year), they typically owe no federal income tax on that interest. Your bank will send a 1099-INT form if interest exceeds $10 in a year, and you'll report it on your tax return.

What happens when your child turns 18

When your child reaches the age of majority — 18 in most states, 21 in a few — the custodial account becomes theirs. The bank will transfer full control to them, and you no longer have authority to make deposits or withdrawals. They can close the account, move the money elsewhere, or keep it open. They can spend it however they want.

This is an important consideration if you're saving money you expect your child to use for college or other specific purposes. Once the account is theirs, you have no legal say in how they use it. Some parents discuss their savings goals with their children as they approach adulthood; others choose a 529 plan specifically because it restricts the money to education.

If your child is a minor and you need to close the account or transfer it, you can do so as the custodian. The bank will not allow your child to make that decision until they reach the age of majority.

Opening an account online versus in person

Many online banks and some traditional banks let you open a custodial account entirely online. You'll photograph your ID and your baby's Social Security card (or birth certificate if you don't have the card yet), answer security questions, and sign electronically. The process usually takes 10 to 15 minutes. The account is typically active within one to three business days.

Some banks require an in-person visit, especially if they don't have a strong online platform. You'll bring your ID and your baby's Social Security number or card, complete a form, and the account opens on the spot or within a few days. In-person accounts can be useful if you want to ask questions or prefer face-to-face service.

Online accounts often have higher interest rates because the bank has lower overhead costs. In-person banks may offer more personalized service or the ability to deposit cash directly. Choose based on what matters most to you — convenience, rate, or service.

Tax considerations and reporting

Money you deposit into your baby's account is not a tax deduction for you. It's your money, and you've already paid taxes on it. The account itself generates no tax liability until interest is earned.

Interest earned on the account is taxable to your child. For 2024, if your child's total unearned income (interest, dividends, etc.) is less than $1,450, they owe no federal income tax. If it exceeds that amount, you'll report it on their tax return or file a separate return for them. This is rarely a concern for young children with small savings accounts, but it matters if the account grows large or earns significant interest.

If you're using a 529 plan, contributions are not tax-deductible at the federal level, but some states offer state income tax deductions for contributions. Earnings grow tax-free, and withdrawals for may have access to education expenses are not taxed. Withdrawals for non-education purposes are taxed as income to your child, plus a 10 percent penalty on the earnings portion.

Frequently Asked Questions

Do I need my baby's Social Security number before I open an account?

Yes, most banks require it. If you don't have the number yet, you can request one from the Social Security Administration online or by mail — it takes one to two weeks. Some banks will let you open an account with your baby's birth certificate and apply for the Social Security number separately, but this is uncommon. It's easiest to get the number first.

Can I open a savings account for my baby if I don't have a Social Security number myself?

This depends on the bank. Some require a Social Security number or Individual Taxpayer Identification Number (ITIN) from the account custodian. Others accept alternative ID. Call the bank directly and ask what forms of ID they accept for the custodian. Credit unions sometimes have more flexible policies than large banks.

What's the difference between a custodial account and putting money in my own account for my child?

A custodial account is legally in your child's name, so it's their asset. If you put money in your own account, it's your asset. This matters for financial aid calculations — money in your child's name counts more heavily against them when they apply for college financial aid. It also matters legally if you pass away; a custodial account transfers to your child, while money in your account becomes part of your estate.

Can I change my mind and close the account before my child turns 18?

Yes. As the custodian, you can close the account at any time and withdraw the money. The money is yours to use as you see fit. However, if you've contributed to a 529 plan or Coverdell account, withdrawing for non-education purposes triggers taxes and penalties on the earnings.

Can multiple people contribute to my baby's savings account?

Yes. Grandparents, aunts, uncles, and friends can all deposit money into a custodial account in your baby's name. You'll need to give them the account number and routing number. They cannot withdraw money or make decisions about the account — only you as custodian can do that. This makes custodial accounts popular for birthday and holiday gifts.