You can open a savings account for a grandchild in your name as custodian, or add them as an authorized user on your own account

The two main paths are a custodial account (held in your name until they reach age 18 or 21, depending on your state) and an authorized user account (where they have a debit card and access to your existing account). A custodial account keeps the money legally separate and teaches the child about saving; an authorized user setup is simpler if you want to manage the account together or give them spending access now. The bank you choose determines which options are available and what paperwork you'll need.

Both routes require you to visit a bank or credit union in person or online with the grandchild's Social Security number and your own ID. Most banks do not charge monthly fees on children's savings accounts, though some require a minimum opening deposit of $25 to $100.

Key Takeaways

  • A custodial account is held in your name as custodian until the grandchild turns 18 or 21, and the money belongs legally to them even though you control it.
  • An authorized user account lets the grandchild use a debit card on your existing account, with you keeping full control over spending limits and access.
  • You will need the grandchild's Social Security number, your ID, and proof of address to open either type of account.
  • Most banks allow you to open a custodial account online, but some require an in-person visit with the child present.
  • Custodial accounts have tax consequences: earnings above $1,300 per year are taxed at the child's rate, which is usually lower than yours.

Custodial accounts: what happens to the money when they turn 18

A custodial account is registered in the child's name but under your control as custodian. You manage all deposits, withdrawals, and investment decisions until they reach the age of majority — 18 in most states, 21 in a few. At that age, the account becomes theirs entirely, and you lose all legal control. They can withdraw the full balance, close it, or leave it open.

The account is opened under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA), depending on your state. Both work the same way from a practical standpoint: the money is a gift to the child, and you cannot take it back or use it for your own expenses. If you need the money later, you cannot legally withdraw it.

Most banks offer custodial savings accounts with no monthly fees and interest rates that match their regular savings products. Some banks also offer custodial investment accounts if you want to put the money into stocks or mutual funds, though those carry more risk and are less common for young children.

Authorized user accounts: keeping control of spending

An authorized user account lets the grandchild access your existing savings or checking account through a debit card or mobile app, but you remain the account owner. You can set spending limits, see every transaction, and revoke access at any time. This is simpler than opening a new account and works well if you want to teach the child about money while keeping close oversight.

The grandchild does not need their own Social Security number for this setup — they are not the account owner, just an authorized user. Many banks allow you to add an authorized user online in minutes, though some require a phone call or in-person visit. You can usually set a daily spending limit or require your approval for purchases over a certain amount.

The downside is that the money is legally yours, not theirs. If you pass away, the account goes into your estate and may not go directly to the grandchild. If you face a lawsuit or creditor claim, the account could be at risk. For these reasons, authorized user accounts work best as a short-term teaching tool rather than a long-term savings vehicle.

What you need to bring to open the account

For a custodial account, bring your government-issued ID (driver's license or passport), proof of your current address (a recent utility bill or bank statement), and the grandchild's Social Security number. Some banks also ask for the grandchild's birth certificate, though it is not always required. If you are opening the account online, you may be able to upload photos of these documents instead of visiting in person.

For an authorized user account on your existing account, you typically only need the grandchild's name and date of birth. You can usually add them through your bank's mobile app or website without visiting a branch. If the bank requires the child's Social Security number, they will ask for it during the process.

If you do not have the grandchild's Social Security number, you can request it from the child's parent or apply for one through the Social Security Administration if the child does not have one yet. The process takes a few weeks, so plan ahead if you are opening the account soon.

Banks and credit unions that offer accounts for grandchildren

Most major banks and credit unions offer custodial savings accounts with similar features and fees. National banks like Chase, Bank of America, and Wells Fargo all have custodial options. Credit unions often have lower fees and higher interest rates, and many will open a custodial account for non-members if a family member joins first.

Some banks market "kids' accounts" or "teen accounts" that are actually custodial accounts with extra features like parental controls or savings goals. These are not different from standard custodial accounts — they just come with educational tools or slightly higher interest rates. Online banks like Ally and Marcus also offer custodial savings accounts, usually with no monthly fees and competitive interest rates.

If you already bank somewhere, start there. Your bank can tell you in one call whether they offer custodial accounts, what the minimum deposit is, and whether you can open one online or need to visit a branch. If your bank does not offer custodial accounts, ask them to recommend a partner bank or credit union that does.

Tax reporting for custodial accounts

Money you deposit into a custodial account is not tax-deductible — it is a gift, and gifts are not deductible on your tax return. However, any interest or earnings the account generates are taxed at the grandchild's tax rate, not yours. For 2024, the first $1,300 of earnings per year is tax-free; earnings above that are taxed at the child's rate (usually 10 percent or less, compared to your likely rate of 22 percent or higher).

The bank will send you a 1099-INT form each January if the account earned more than $10 in interest. You will need to report this on the grandchild's tax return if one is required. Many grandchildren do not file a tax return, so you may not owe anything — but check with a tax professional if the account has grown significantly.

Custodial accounts do affect the grandchild's financial aid if they go to college. Schools count custodial assets as the student's own money, which can reduce aid may be able to access more than if the money were in a parent's name. If college aid is a concern, talk to a financial aid advisor before opening a large custodial account.

Moving money into the account and setting savings goals

Once the account is open, you can deposit money by transferring from your own bank account, mailing a check, or depositing cash at a branch. Most banks allow recurring transfers, so you can set up automatic deposits each month if you want to build the account steadily. There are no limits on how much you can deposit into a custodial account in a single year.

Many banks let you set savings goals within the account — for example, "college fund" or "first car" — and track progress toward them. These are optional features that do not change how the account works legally, but they can help the grandchild understand what the money is for and stay motivated to save.

If you want to give the grandchild access to the account before they turn 18, you can request a debit card from most banks. The card will be in their name but linked to the custodial account. You can usually set spending limits or require your approval for large purchases, depending on the bank's options.

Frequently Asked Questions

Can I open a custodial account if the grandchild's parent does not want me to?

Legally, yes — a custodial account is a gift from you to the grandchild, and you have the right to make gifts. However, you will need the child's Social Security number, which the parent controls. If the parent refuses to provide it, you cannot open the account. It is worth having a conversation first to understand their concerns.

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

The account belongs to the grandchild, not to your estate. It passes to them automatically, but a court may appoint a guardian to manage it until they reach the age of majority. Name a successor custodian in your will or trust to avoid this process — most banks let you designate one when you open the account.

Can the grandchild's parent withdraw money from a custodial account I opened?

No. Only you as custodian can withdraw money, and only for the grandchild's benefit (education, medical care, living expenses). The parent has no legal right to access it. If you die or become unable to manage the account, a court will appoint a new custodian, not the parent.

Is there a limit to how much I can put into a custodial account each year?

There is no annual limit on deposits to a custodial account itself. However, gifts over $18,000 per year (in 2024) may trigger gift tax reporting, though you likely will not owe tax. Check with a tax professional if you plan to deposit large amounts in a single year.

Can I move money from a custodial account to an investment account later?

Yes. Once the account is open, you can transfer the balance to a custodial investment account at the same bank or a different one. The custodial status stays the same — the money still belongs to the grandchild and transfers to them at the age of majority. Some families do this when the child is older and can tolerate more investment risk.