Yes, you can open a savings account for your grandchild, but the account type depends on their age
If your grandchild is under 18, you will open a custodial account (also called a minor account) in their name with you as the custodian. You control the account until they reach the age of majority — 18 in most states, 21 in a few. The account belongs to them legally; you are the manager, not the owner.
If your grandchild is 18 or older, they can open their own account. You can give them money to deposit, but you cannot open the account for them or control it without their signature and consent.
Most banks and credit unions offer custodial savings accounts. The process takes about 15 to 30 minutes in person or online, depending on the institution. You will need your grandchild's Social Security number, proof of your identity, and proof of your address.
Key Takeaways
- A custodial account is opened in your grandchild's name with you as the custodian, and you control it until they reach 18 or 21 depending on your state.
- You will need your grandchild's Social Security number, your ID, and proof of address to open the account at a bank or credit union.
- The account belongs to your grandchild for tax purposes, which means interest earned is taxed at their rate, not yours — usually lower.
- When your grandchild reaches the age of majority, the account transfers to their full control and you can no longer make decisions about it.
What documents and information you need to bring
Bring your government-issued ID (driver's license, passport, or state ID) and a recent utility bill, bank statement, or lease showing your current address. The bank will verify both before opening the account.
You will also need your grandchild's Social Security number. If your grandchild does not have one yet, you can request one from the Social Security Administration before opening the account, or some banks will hold the application until you provide it. The process to get a Social Security number takes about two weeks by mail or can be done in person at a local Social Security office.
Some banks ask for your grandchild's birth certificate as proof of age and identity. Call ahead to confirm what the specific bank requires — requirements vary slightly between institutions.
How the account works once it is open
You can deposit money into the account at any time. You can also withdraw money, but the account is legally your grandchild's property. This matters if you face a lawsuit or bankruptcy — creditors generally cannot touch money in a custodial account because it is not yours.
Interest earned on the balance is taxed at your grandchild's tax rate, not yours. For 2024, the first $1,450 of unearned income (interest, dividends) is tax-free for a dependent minor. Income above that is taxed at the child's rate, which is usually much lower than yours. This is one reason custodial accounts are useful for saving money intended for a grandchild.
You receive a statement each month or quarter showing deposits, withdrawals, and interest earned. Some banks offer online access so you can check the balance anytime.
What happens when your grandchild turns 18 or 21
The account automatically transfers to your grandchild's full control on the date they reach the age of majority in your state. You lose all authority to make withdrawals or decisions about the money. The bank will notify you and your grandchild of the transfer date in advance.
Your grandchild can then withdraw the money, keep it in the account, or move it to another bank. You have no say in what they do with it once the transfer is complete. This is an important reason to talk with your grandchild about the account's purpose before they reach that age.
Some families use this transition as a teaching moment — sitting down with the young adult to discuss saving, spending, and long-term financial goals.
Custodial accounts versus other ways to save for a grandchild
A 529 college savings plan is another option if your goal is to fund education. You can open a 529 in your grandchild's name with you as the account owner (not custodian). You keep control of the money even after they turn 18. Money grows tax-free if used for college tuition, room and board, books, or certain other education expenses. If it is not used for education, you pay taxes and a 10 percent penalty on the earnings — though recent rule changes allow some transfers to Roth IRAs.
A Uniform Transfers to Minors Act (UTMA) account is similar to a custodial account but can hold investments like stocks and mutual funds, not just savings. It works the same way — you control it until your grandchild reaches 18 or 21, then it transfers to them.
A simple savings account in your own name gives you full control but creates tax and legal complications. If you pass away, the money becomes part of your estate and may be subject to probate. It also counts as your asset for Medicaid purposes if you ever need long-term care.
| Account Type | Who Controls It | When Control Transfers | Best For |
|---|---|---|---|
| Custodial Savings Account | You (custodian) until age 18–21 | Automatically at age of majority | General savings, teaching money management |
| 529 College Savings Plan | You (account owner) indefinitely | Never — you keep control | Education expenses, tax-free growth |
| UTMA Investment Account | You (custodian) until age 18–21 | Automatically at age of majority | Stocks, bonds, and other investments |
| Account in Your Name | You (full owner) | Never — becomes part of your estate | Short-term savings, if you want to keep control |
Where to open a custodial savings account
Most banks and credit unions offer custodial accounts. Large national banks like Chase, Bank of America, and Wells Fargo all have them. Online banks like Ally, Marcus, and Discover also offer custodial savings accounts, often with higher interest rates than brick-and-mortar banks.
Credit unions often have lower fees and competitive rates. If you belong to a credit union, ask whether they offer custodial accounts — many do, and membership requirements may extend to your grandchild.
You can open an account in person at a branch, by phone, or online depending on the bank. Online applications are usually fastest — you upload photos of your ID and your grandchild's birth certificate, provide the Social Security number, and the account opens within one to three business days.
Frequently Asked Questions
Do I need my grandchild's permission to open a custodial account?
No. As the custodian, you can open the account without their knowledge or consent. However, they will eventually receive statements and learn about the account. Many grandparents tell the child about it to encourage saving and explain why the money is set aside.
Can I use money from the custodial account to pay for my grandchild's expenses?
Yes, but only for expenses that benefit your grandchild directly — school tuition, medical bills, sports equipment, or other costs related to their care and upbringing. You cannot use it to pay your own bills or household expenses. The IRS can challenge withdrawals that look like personal use.
What if my grandchild's parent objects to the account?
The account is legally your grandchild's, not their parent's. However, if your grandchild is very young, the parent may have practical control over access to statements and information. If there is family conflict, consider whether a 529 plan (which you control indefinitely) might be a better fit.
Can I name someone else as custodian if something happens to me?
No. The custodian role does not transfer automatically. If you die, the account becomes part of your estate and is handled according to your will or your state's inheritance laws. To ensure someone you trust takes over, name them as custodian in your will or set up a trust. Talk to an estate attorney about the best approach for your situation.
How much interest will the account earn?
Interest rates vary by bank and change monthly. As of early 2024, high-yield savings accounts pay between 4 and 5 percent annually, while traditional savings accounts pay 0.01 to 0.5 percent. Check the bank's website or call to compare rates before opening. Online banks typically offer higher rates than traditional banks.