What you need to open an account in your grandchild's name

You can open a savings account for a grandchild at most banks and credit unions, but the account structure depends on the child's age and whether you want to manage it yourself or give them access later. If your grandchild is under 18, the account will be a custodial account — you are the legal owner and manager until they reach the age of majority (18 or 21, depending on your state). The child's name appears on the account, but you make all decisions about deposits, withdrawals, and how the money is used.

To open the account, bring the grandchild's Social Security number (or Individual Taxpayer Identification Number if they don't have one), a form of ID for yourself, and proof of address. Most banks accept a driver's license, passport, or state ID. Some credit unions may also ask for proof of address — a recent utility bill, lease, or bank statement works. Call ahead to confirm what your specific bank or credit union requires, because requirements vary.

You do not need the child's parent or legal guardian to be present, but some institutions ask for written consent from a parent. If the child's parents are not involved in the decision, ask the bank directly whether they require parental permission before you visit. This varies by institution and sometimes by state.

Key Takeaways

  • A custodial savings account lets you open and manage an account in your grandchild's name until they turn 18 or 21, depending on your state.
  • You will need your grandchild's Social Security number, your ID, and proof of address; some banks also ask for parental consent in writing.
  • Banks and credit unions both offer custodial accounts, and rates and fees vary widely — compare options before opening.
  • Money in a custodial account belongs to the child legally, and they gain control of it when they reach the age of majority in your state.
  • You can set up automatic deposits from your own account to make regular contributions without visiting the bank.

Choosing between a bank and a credit union

Banks and credit unions both offer custodial savings accounts, but they differ in fees, interest rates, and membership requirements. Banks typically have more branches and ATMs, which matters if you want to deposit cash in person regularly. Credit unions often pay higher interest rates on savings and charge lower fees, but you must be a member — membership is usually free and based on where you live, work, or go to school, or on family connections.

Compare the monthly maintenance fee (some charge nothing, others charge $5 to $15 per month), the interest rate the account earns, and any minimum balance requirements. A few banks and credit unions waive fees for accounts under $500 or for accounts opened by minors. Online banks sometimes offer the highest interest rates but have no physical branches, which means you deposit by mail or transfer or through a mobile app.

If you plan to make regular deposits in cash, a bank or credit union with a local branch near you will be most convenient. If you prefer to transfer money electronically from your own account, an online bank may offer better rates with no branch visits needed.

What happens to the account when your grandchild turns 18

When your grandchild reaches the age of majority in your state — 18 in most states, 21 in a few — the custodial account automatically converts to a regular account in their name. You lose legal control and cannot make withdrawals or decisions about the money without their permission. The bank will notify you and your grandchild of the conversion, usually a few months before it happens.

The money in the account belongs to your grandchild at that point, and they can withdraw it, close the account, or leave it open. If you want to discuss what happens to the money, have that conversation with them before the conversion date. Some grandparents use the account as a teaching tool and talk with the young adult about saving goals or how to manage money responsibly.

If you want to continue contributing to their savings after they turn 18, you can transfer money to their account as a gift, but you will no longer have legal authority over it. They can refuse the deposit or withdraw it immediately if they choose.

Setting up automatic deposits and monitoring the account

Most banks and credit unions let you set up automatic transfers from your own account to your grandchild's custodial account. This is the easiest way to make regular contributions — you choose the amount and frequency (weekly, monthly, or any schedule you prefer), and the transfer happens without you having to visit or call. Set it up through your own bank's online portal or by calling the bank that holds your grandchild's account.

You can monitor the account through online banking or a mobile app, and most banks send monthly statements by mail or email. Some banks let you set up alerts so you receive a notification each time a deposit or withdrawal happens. This is useful if you want to track the account's growth or catch any unauthorized activity, though custodial accounts have limited risk since only you and the bank can access them.

If your grandchild is old enough to understand saving, some banks offer youth accounts with a debit card or limited online access so the child can see the balance and learn about money management. Ask whether the bank offers this option if you think it would help your grandchild understand the account.

Tax considerations for custodial accounts

Interest earned in a custodial account is taxable income to your grandchild, not to you. The bank will send a 1099-INT form each year if the account earns more than $10 in interest. Your grandchild (or their parent, if they are a minor) will report this on a tax return. In most cases, the amount is small enough that no tax is owed, but the form must still be filed if required.

Money you deposit into the account is not a tax deduction for you — it is a gift. The IRS allows you to give up to a certain amount per year per person without filing a gift tax return. For 2024, that amount is $18,000 per person per year. If you give more than that in a single year, you must file a gift tax return (Form 709), though you typically do not owe tax unless you have given away a very large amount over your lifetime. Check the current year's limit with a tax professional if you plan to contribute a large sum.

Alternatives if you want more control or investment growth

A custodial savings account is the simplest option, but it may not be the best choice if you want the money to grow faster or if you want to ensure it is used for a specific purpose like education. A 529 college savings plan is a tax-advantaged account designed for education expenses — contributions grow tax-free, and withdrawals for tuition, books, and room and board are not taxed. You can open a 529 plan in your grandchild's name and contribute much more than you could to a regular savings account without gift tax consequences.

A custodial brokerage account (also called an UGMA or UTMA account, depending on your state) lets you invest in stocks, bonds, or mutual funds on behalf of your grandchild. These accounts offer more growth potential than a savings account but carry investment risk. You manage the account until your grandchild reaches the age of majority, at which point they inherit the account and its contents.

A regular savings account is best if you want simplicity, safety, and easy access to the money. A 529 plan is best if education is the goal. A custodial brokerage account is best if you want investment growth and can tolerate market fluctuations. Discuss your goals with a financial professional if you are unsure which option fits your situation.

Common issues and how to handle them

One common issue is that money in a custodial account may affect your grandchild's financial aid if they attend college. Schools count custodial assets as the student's resources, which can reduce the amount of need-based aid they receive. If education funding is a concern, talk to a financial aid advisor before opening a large custodial account. A 529 plan, by contrast, has less impact on financial aid may be able to access in many cases.

Another issue arises if your grandchild's parents object to the account or want control over it. A custodial account is legally yours to manage, but family conflict can make the situation uncomfortable. If you expect disagreement, have a conversation with the parents beforehand about your intentions and how the money will be used.

If you become unable to manage the account due to illness or incapacity, the bank may freeze it or require a court order to transfer management to someone else. You can name a successor custodian when you open the account, or update it later, so the account does not become stuck if something happens to you. Ask the bank about this option when you open the account.

Frequently Asked Questions

Can I open a custodial account if I'm not the grandchild's parent?

Yes. Any adult can open a custodial account for a minor. You do not need to be a parent or legal guardian. Some banks ask for parental consent, but many do not. Call ahead to confirm the bank's policy before you visit.

What's the difference between a custodial account and a trust?

A custodial account is simpler and cheaper to set up — you open it at a bank like any other account. A trust is a legal document that requires an attorney and gives you more control over how and when the money is used after your grandchild turns 18. A trust is worth considering if you want to restrict access to the money or leave detailed instructions about its use.

Can my grandchild withdraw money from the account before they turn 18?

Only you can withdraw money while you are the custodian. Your grandchild cannot access it without your permission. Some banks offer youth accounts with a debit card that lets the child make small purchases, but you control the overall account and can see all activity.

Do I have to tell my grandchild about the account?

You do not have to, but many grandparents tell the child about it as a way to teach about saving and show they care. Telling them can motivate them to save their own money or understand the value of long-term planning. The choice is yours.

What happens if I die before my grandchild turns 18?

The account becomes part of your estate. Your will or trust should name someone to take over as custodian, or the court may appoint a guardian to manage it. Without clear instructions, the account could be frozen until a court decides who manages it. Name a successor custodian when you open the account to avoid this problem.