Yes, you can open a savings account for a grandchild, but the rules depend on the child's age and your relationship to the bank

You can open a savings account in a grandchild's name at most banks and credit unions. If the grandchild is under 18, you will be the account owner initially and the child becomes the owner when they reach the age of majority (18 in most states, 21 in a few). If the grandchild is 18 or older, they can open their own account, though you can still contribute money to it.

The specific rules vary by bank and by state. Some banks let you open an account for a minor with just an ID and the child's Social Security number. Others require the child to be present in person. A few banks have minimum deposit requirements or monthly fees that can eat into small balances. Before you choose a bank, call ahead and ask what documents you need and whether there are fees for accounts held by minors.

Key Takeaways

  • You can open a savings account for a grandchild under 18 in your name as custodian, and the child takes ownership at age 18 or 21 depending on your state.
  • Most banks require the grandchild's Social Security number and your ID, though some require the child to be present in person.
  • A custodial account is different from a trust or a gift — the money belongs to the child for tax purposes, which may affect their financial aid later.
  • If you want the money to stay in your control longer or to go to someone else if the child dies, you will need a different legal structure like a trust.
  • Compare banks on fees, minimum balances, and interest rates, because accounts for minors often have different terms than adult accounts.

Custodial accounts: what you own and what the child owns

When you open a savings account for a minor grandchild, the bank creates what is called a custodial account or UTMA account (Uniform Transfers to Minors Act). You are the custodian — you control the account and can deposit or withdraw money. The grandchild is the beneficial owner — the money legally belongs to them for tax and financial purposes, even though you manage it.

This matters because the IRS will tax the account earnings in the child's name, not yours. It also matters if the grandchild later applies for financial aid for college — the money in a custodial account counts as the child's asset, which can reduce aid more than if the money were in your name. Once the child reaches 18 (or 21 in some states), they take full control of the account and can spend it however they want. You lose the ability to say no.

If you want the money to stay in your control longer, or to go to a different grandchild or charity if this grandchild dies, a custodial account is not the right tool. You would need a revocable trust or a will instead. Talk to a lawyer about which structure fits your goals.

What documents and information you will need

To open a custodial account, bring your ID (driver's license or passport) and the grandchild's Social Security number. Some banks also ask for the child's birth certificate or a copy of it. If the grandchild is old enough to come with you, some banks require them to be present; others do not. Call the bank first to ask what they need and whether the child has to be there.

If you do not have the child's Social Security number, you can request one from the Social Security Administration online or by mail. The process takes a few weeks. If the grandchild does not have a number yet, you can apply for one at the same time you open the account, though the bank may ask you to come back once the number arrives to complete the setup.

Some banks ask for a second form of ID or proof of address. If you have moved recently or your ID is expired, bring a utility bill or lease in your name as backup. The exact requirements vary, so ask the bank what counts before you make the trip.

Banks and credit unions with different rules for minor accounts

Most national banks and credit unions let you open custodial savings accounts, but the terms are not the same everywhere. Some banks waive monthly fees for accounts held by minors; others charge $5 to $10 per month. Some require a minimum deposit of $25 or $100; others have no minimum. Interest rates on savings accounts are low across the board right now, but they vary — some banks pay 0.01% annual interest, others pay 4% or higher on high-yield savings accounts.

Online banks often have higher interest rates and lower fees than brick-and-mortar banks, but you cannot walk into a branch to deposit cash. Credit unions sometimes offer better rates and lower fees than banks, especially if you are already a member. Some credit unions let you open an account for a grandchild even if the child is not a member yet; others require the child to join first.

Before you open an account, compare at least three banks or credit unions on these points: monthly fees, minimum deposit, interest rate, whether you can deposit cash, and whether the child can have a debit card. A bank with no monthly fee and a 4% interest rate will grow the money much faster than one with a $10 monthly fee and 0.01% interest.

When the grandchild turns 18: what happens to the account

On the day the grandchild turns 18 (or 21 in Alabama, Arkansas, Nebraska, Utah, and Wyoming), they become the legal owner of the account. You lose the right to control it or see what is in it. The bank may send you a notice, or it may not — you will need to ask the grandchild or call the bank to find out what happened.

Some banks automatically convert the account to a regular adult account. Others require the young adult to come in and sign new paperwork. If the grandchild does not take action, the account may stay open but become inactive. If you want to stay involved after the child turns 18, you will need to ask them to add you as an authorized user or joint owner — they can say no.

If you are worried about the grandchild spending the money unwisely, a custodial account is not the right tool. Once they turn 18, the money is theirs to use as they choose. If you want to keep control longer, talk to a lawyer about setting up a trust instead, which can hold the money until the grandchild is 21, 25, or even older.

Alternatives if a custodial account does not fit your situation

A revocable living trust lets you put money aside for a grandchild while keeping control of it during your lifetime. You decide when and how much the grandchild gets, and you can change your mind. When you die, the trust can pass the money to the grandchild or hold it in trust for them until they are older. A lawyer can set up a trust for $500 to $2,000 depending on where you live and how complex your situation is.

A 529 college savings plan is a tax-advantaged account designed specifically for education expenses. You open it in your name as the account owner, and you name the grandchild as the beneficiary. The money grows tax-free as long as it is used for college, graduate school, or certain other education costs. If the grandchild does not go to college, you can change the beneficiary to another grandchild or take the money out (though you will owe taxes and a penalty on the earnings).

A regular savings account in your own name is the simplest option if you just want to save money for the grandchild without giving up control. You can leave the money to them in your will. The downside is that the money counts as your asset for tax purposes, and if you need it for your own care later, it is available to you.

Tax implications of a custodial account

The earnings on money in a custodial account are taxed in the grandchild's name, not yours. For 2024, the first $1,450 of earnings per year is tax-free (this amount changes each year). Earnings above that are taxed at the child's tax rate, which is usually lower than yours. If the grandchild has no other income, you may not need to file a tax return for them at all.

The money you deposit into the account is not a tax deduction for you — it is a gift. You can give up to $18,000 per year to each grandchild without filing a gift tax return (this limit changes each year). If you give more than that in one year, you have to file a form with the IRS, though you probably will not owe tax unless your lifetime gifts exceed $13.61 million.

If the grandchild later applies for federal financial aid for college, the money in a custodial account will count against them. A student with $10,000 in savings may receive $1,000 to $2,000 less in aid than a student with no savings. If financial aid is a concern, talk to a financial aid counselor before you open a custodial account.

Frequently Asked Questions

Can I open a savings account for a grandchild without their Social Security number?

No, banks require a Social Security number to open any account. If the grandchild does not have one yet, you can request one from the Social Security Administration before you go to the bank. The process takes a few weeks by mail or a few days online.

What happens if I die before the grandchild turns 18?

The money in the custodial account belongs to the grandchild, not to your estate. A court will appoint a new custodian (usually a parent or another relative) to manage the account until the child turns 18. The money will not go through probate. If you want to control what happens to the money after you die, set up a trust instead of a custodial account.

Can I take money out of the account if I need it?

Legally, no — the money belongs to the grandchild, and taking it out for your own use is considered a misuse of the account. In practice, banks do not police this, but if the grandchild or a court finds out, you could face legal trouble. If you might need the money later, keep it in your own account instead.

Can the grandchild have a debit card for the account?

Some banks issue debit cards for custodial accounts once the child is 13 or 14; others do not. Ask the bank what age the child has to be and whether there are spending limits. A debit card can teach the child about money management, but it also means they can spend the balance without your permission.

Is a custodial account the same as a trust?

No. A custodial account is simpler and cheaper to set up, but you lose control when the child turns 18. A trust lets you keep control longer and decide exactly when and how the grandchild gets the money. A trust costs more to set up but gives you more options if your situation is complicated.