Can a Minor Buy a Certificate of Deposit?

Buying a certificate of deposit (CD) may not seem like child’s play, but minors can actually invest their money in a CD with a little help from an adult. Beyond the scope of merely saving their money in a piggy bank, minors can actually make money on their CD investment, just like adults. But minors still need an adult to set up this investment for them, which is allowed by law under the Uniform Gifts to Minors Act and the Uniform Transfers to Minors Act.

Because CDs are legally binding contracts that are off-limits for minor children to enter into, minors cannot open their own CD accounts. But persons of legal age of majority, such as parents or other relatives, can open CD accounts for minor children, which are called custodial accounts. Although adults become the custodians of the accounts they open or transfer on behalf of minors, the minors themselves are the legal owners of the funds in the account. The adult opens (or transfers) and maintains the CD account until the minor child reaches the age of majority or the effective date specified by the state where the CD was issued, which may be different from the age of majority. The age range typically falls between 18 and 21.

The age at which a minor is legally considered an adult is called the age of majority. To put a spin on a sports term, it’s similar to athletes that move from playing in the minor leagues to the major leagues – the majors are essentially a step up from the minors. Similarly, in the legal hierarchy of minor vs. age of majority, reaching a certain age determines the step up from child to adult. This age is not federally mandated, and it varies from state to state. Most states define the age of majority as 18, but other states define it differently. An example is Nebraska, which defines the age of majority as 19. California is an example of a state in which the age of majority – 18 – is the same age as the effective date by which minors are able to access their custodial CD funds.

Each state determines the effective date by which minors can access their custodial CD funds. In Georgia, the age of majority is 18, but minors must be 21 to access their funds. You can find the laws for your state by performing an online search for "Uniform Gifts to Minors Act and Uniform Transfers to Minors Act effective date" and entering your state's name where the CD will be issued. Some states have repealed the older Uniform Gifts to Minors Act legislation, such as Arizona and California, and replaced it with the Uniform Transfers to Minors Act, but other states still follow both. If you're unsure about the law in your state, an inclusive online search with Uniform Gifts to Minors Act and Uniform Transfers to Minors Act in the search parameters will cover both bases.