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 rules depend on the child's age and whether you want to be the sole owner or a joint owner. If your grandchild is under 18, you will be the account owner and custodian — the child's name appears on the account, but you control the money and make all decisions until they reach the age of majority (18 in most states, 21 in a few).

To open the account, bring your ID and Social Security number, your grandchild's birth certificate and Social Security number, and proof of your current address (a utility bill or bank statement works). Some banks also ask for a second form of ID. Call ahead to confirm what your specific bank requires, because requirements vary by institution.

If your grandchild is 16 or 17, some banks allow them to open their own account with your co-signature. A few banks let teenagers 13 and older open accounts independently through a parent or guardian, though you would still need to be involved. Ask the bank directly whether your grandchild can sign the paperwork themselves or whether you must be the sole signer.

Key Takeaways

  • You will be the legal owner and custodian of the account until your grandchild reaches 18 or 21, depending on your state.
  • Bring your ID, Social Security number, your grandchild's birth certificate, their Social Security number, and proof of your address to open the account.
  • A custodial savings account earns interest and teaches your grandchild about saving, but the money belongs to them once they turn 18 and can withdraw it for any reason.
  • Some grandparents use a Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) account to set aside money with tax advantages, though these have rules about when the child can access the funds.
  • Once your grandchild turns 18, the account converts to a regular account in their name, and you lose control over how they spend the money.

Custodial accounts versus UTMA and UGMA accounts

A custodial savings account is the simplest option. You open it at a bank or credit union in your grandchild's name, with yourself listed as custodian. The money earns whatever interest rate the bank offers (usually very low for savings accounts). You can deposit money whenever you want, and you can withdraw it for your grandchild's needs — school supplies, medical bills, clothing — while they are a minor. The account is yours to manage, but the money legally belongs to your grandchild.

An UTMA account (Uniform Transfers to Minors Act) or UGMA account (Uniform Gifts to Minors Act) is a different legal structure. You transfer money into the account as a gift, and the money is irrevocably your grandchild's — you cannot take it back. The account grows tax-free up to a certain amount each year (the threshold changes annually; check the IRS website for the current limit). Once your grandchild turns 18 or 21 (depending on your state), they have full control and can spend the money however they want. UTMA and UGMA accounts are often used for larger gifts or long-term savings because of the tax advantages, but they require you to give up control of the money.

Most grandparents start with a custodial savings account because it is simpler and gives you more flexibility. You can move to an UTMA or UGMA account later if you want the tax benefits, but talk to a tax professional or your bank first, because the rules vary by state and by how much money you are setting aside.

Where to open the account and what to compare

You can open a custodial savings account at any bank, credit union, or online bank. The main differences are the interest rate, monthly fees, and minimum balance requirements. Online banks often pay higher interest rates than brick-and-mortar banks, but they do not have physical branches if you need to deposit cash or speak to someone in person.

Compare the annual percentage yield (APY) across a few institutions — even a difference of 0.5% adds up over years. Check whether there is a monthly maintenance fee (many banks waive it if you keep a minimum balance, often $100 to $500). Some banks also offer perks like a debit card for teenagers or a matching deposit program where the bank adds money to the account if you deposit a certain amount.

Credit unions often have lower fees and competitive rates, and membership is sometimes open to family members of existing members. If you belong to a credit union, ask whether they offer custodial accounts and what the terms are.

How to fund the account and set savings goals

Once the account is open, you can deposit money by transferring it from your own bank account, depositing a check, or (at some banks) depositing cash in person. Set up automatic transfers if you want to contribute a fixed amount each month — many banks let you schedule this through their website or app. Some grandparents deposit money on birthdays or holidays, while others set up a monthly contribution of $25 or $50.

Talk to your grandchild about what the money is for, even if they are young. Is it for college? A car when they turn 16? A down payment on a house someday? Having a goal makes saving feel real and teaches them why you are putting money aside. As they get older, show them the account statements so they can see the balance grow and understand how interest works.

Be clear with your grandchild and their parents about what will happen to the money when your grandchild turns 18. If you expect them to use it for college or a car, say that. If you are giving them the money to do whatever they want with, say that too. Mismatched expectations cause conflict later.

Tax implications and reporting requirements

Interest earned in a custodial savings account is taxable income to your grandchild, not to you. If the interest is small (under $1,200 per year for most children), your grandchild probably does not owe federal income tax on it, but you may need to file a tax return anyway depending on their total income. Check the IRS website each year for the current threshold.

If you open an UTMA or UGMA account, the situation is different. The money you transfer is a gift, not income, so it is not taxable to your grandchild. However, any interest or investment gains in the account may be taxable. The first $1,300 or so of unearned income (interest, dividends) is usually tax-free for a minor; income above that is taxed at the child's rate or, in some cases, at your rate. A tax professional can explain the rules for your specific situation.

You do not have to report the account to the government unless it is very large or generates significant income. A simple savings account with a few thousand dollars and minimal interest is not a concern. If you are setting aside a large sum or investing the money, talk to a tax advisor.

What happens when your grandchild turns 18

On your grandchild's 18th birthday (or 21st in some states), the custodial account automatically converts to a regular account in their name. You are no longer the custodian, and you no longer have legal authority over the money. Your grandchild can withdraw it all, spend it, or leave it in the account — that is entirely their choice.

This is why it matters to talk about the money's purpose while your grandchild is still a minor. If you have been saving for college and your grandchild decides to spend it on a car instead, there is nothing you can do legally. Some grandparents accept this as part of teaching financial responsibility; others set up a trust or a 529 college savings plan instead, which has more restrictions on how the money can be used.

Before your grandchild turns 18, make sure they know the account exists and understand how to access it. Some banks require the account holder to visit in person or call to make changes once they turn 18. Provide your grandchild with the account number, the bank's contact information, and any passwords or PINs they will need.

Alternatives if a regular savings account does not fit your situation

If you want to save for college specifically, a 529 plan offers tax advantages and more control over how the money is used. Money in a 529 can only be withdrawn for college expenses without penalty, so your grandchild cannot spend it on a car or a vacation. Each state runs its own 529 plan, and you can open one in any state regardless of where you or your grandchild live.

If you want to leave money to your grandchild after you die, a trust or a will is more appropriate than a savings account. A lawyer can help you set this up, and it ensures the money goes where you want it to go and is managed the way you intend.

If your grandchild's parents are already saving for them, ask what they are doing before you open another account. You might contribute to their existing 529 plan or custodial account instead of opening a separate one. Coordination avoids duplication and makes it easier for your grandchild to understand their savings picture later.

Frequently Asked Questions

Can I open a savings account for a grandchild without their parents' permission?

Legally, yes — you can open a custodial account in your grandchild's name using their Social Security number and birth certificate. However, it is a good idea to tell the parents first. If they find out later, it can damage trust. If the parents object strongly, they may be able to close the account or move the money, depending on your state's laws.

What if I want to leave money to my grandchild in my will instead of opening a savings account now?

That works, but a will does not take effect until you die, and the money may be tied up in probate for months. If you want your grandchild to have access to money sooner, a savings account or a trust set up now is better. Talk to a lawyer about what makes sense for your situation.

Can my grandchild access the money before they turn 18?

In a custodial account, only you can withdraw the money while they are a minor. In an UTMA or UGMA account, the rules vary by state, but generally only you can access it until they reach 18 or 21. If your grandchild needs money for a legitimate expense, you can withdraw it and give it to them or pay the expense directly.

Do I have to report the account to the government?

No, unless the account is very large or generates significant income. A simple savings account with a few thousand dollars and minimal interest does not require any special reporting. If you are concerned, ask your tax preparer or the bank.

What if I die before my grandchild turns 18?

The account becomes part of your estate. Your will or trust should specify what happens to it — usually it goes to your grandchild, but it may be held in trust until they reach a certain age. Without a will, your state's laws determine who inherits it. Make sure your will is clear about this account so there is no confusion later.