How to Open a Savings Account for Your Child

How to Open a Savings Account for Your Child
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Opening a savings account for your child can give your kid an early start learning about money management and help them save money for goals. Depending on the bank and your location, your options usually include opening a custodial account or joint account with your kid. In either case, you can expect to have control over the account, and your child can get full ownership upon reaching legal age.

Here's what you need to know to get a better understanding of these accounts and the process you'll follow to open one for your child.

Comparing Child Savings Account Types

Since signing documents to open a savings account requires being at least 18 or 21, your kid will need your help in getting an account as well as managing the money within it. Most states have laws that allow you and your child to open a joint bank account where you both get access to make deposits and take out cash. Some states, such as Texas and West Virginia, allow you to do so with limitations, while others, including North Dakota and Florida, don't have a specific laws and thus leave it up to bank policy.

Instead of a joint account, you can open a custodial account in your child's name where you'll manage the account alone until you hand over control when your child reaches legal age. Depending on the state, the account may adhere to provisions for either the Uniform Gift to Minors Act or Uniform Transfers to Minors Act (UTMA). Both allow for cash savings and common financial products, while UTMA accounts go beyond to include property like real estate and patents.

Consider the implications of each type of savings account to decide which works best for your child. For example, you can access money in a joint account more easily for family emergencies than for a custodial account intended only for your child's future use. This is because the money in a custodial account is considered irrevocable like a gift and can lead to tax issues and legal issues if you misuse the funds or change ownership later on.

Understanding Kids Savings Account Features

To help compare the kids savings account options that are available at various banks, take a look at some of these common trends you'll find during your research:

  • Low or waived monthly service fees: Unless they're working teens, kids usually don't have extra cash to pay monthly maintenance fees like adults may. Thankfully, banks understand this and may waive such fees entirely until your child reaches legal age. In other cases, you should find reasonable fees of $10 or less, with higher fees more common for custodial accounts.
  • Low or no initial deposit: Compared to the $100 or higher minimum opening deposits you might see for adult savings accounts, you can often find kids savings accounts requiring $25 or less. Some banks waive this initial deposit minimum entirely so that your child can deposit whatever they have in their piggy bank.
  • Potentially higher interest rate: Especially at online banks, your child may get a higher interest rate than they would for a regular adult account. Of course, weigh any return against the account fees so that your kid can see the most money back on their investment.
  • Savings plan options: Whether the account serves as a college savings fund or a place for your child to save for their first car, banks often offer some way to automate the savings process to help your child reach their goal. For example, this may include automated monthly transfers where you can have money moved from your bank account to theirs.
  • Online banking and mobile app: With your supervision, your kid can usually download the bank's mobile app or use their banking website to watch their savings grow. As the custodian or joint owner, you can use these tools to transfer money and remotely deposit checks that your child receives.
  • Financial education tools: While the experience of having a savings account provides your child with important life knowledge and experience, banks often incorporate learning opportunities into online banking tools and may offer advice or educational materials at your local branch, too.
  • Insurance on funds: Your child's savings account should be at a bank with Federal Deposit Insurance Corporation insurance so that their money has protection if the bank goes under or faces theft. The base amount insured runs $250,000 for each depositor of the savings account, and you can have accounts at multiple banks if your child's savings surpass that.
  • Withdrawal limits: Your child's savings account doesn't act as a checking account, so expect a limit of six withdrawals per billing cycle, with fees applying for additional electronic transactions or bank checks. Your kid can still access their money without such limits through in-person cash withdrawals.
  • Limited access for kids: Expect laws and bank policies to determine the access your child will have to the account. Joint accounts allow you and your child to deposit and withdraw money together, while you can handle online money transfers. Further, Wells Fargo provides ATM card access to minors of any age for joint accounts and allows online access once they turn 13. If you open a custodial account, your kid won't have any access until they reach legal age.
  • Later account transfer or conversion: Banks offering joint savings accounts for kids often convert the account to a regular savings account when your child reaches legal age. You can then have yourself removed from ownership so that your child has sole access. With a custodian account, you'll legally have to transfer access to your child at legal age.

Reviewing Kids Savings Account Options

When searching for a savings account for your kid, you can choose from online and brick-and-mortar financial institutions like banks and credit unions. Consider online banks if you're fine with lower fees and higher interest with the downside of more limited access to the money for you and your child. Traditional banks and credit unions vary in fees and interest but make it easier for cash deposits and in-person support.

Any of these types of institutions will vary in the kids savings account options they offer, so take a look at some sample banks and accounts:

  • Wells Fargo: You can find three types of minor savings accounts through Wells Fargo. You have the standard joint account with ATM card access as well as online access for minors 13 and older. There's also a "minor by" option that gives you full control until your child turns 18 as well as UTMA/UGMA custodian accounts for irrevocable gifted funds that go to your child at legal age.
  • Capital One: The joint savings account for kids through Capital One comes with no maintenance fee or initial deposit requirement. Your child can use a mobile app to create a savings plan and monitor their transactions, and you can link your bank account for easy transfers.
  • Bank of America: You can choose either a joint minor savings account or custodial UTMA account at Bank of America. Minors don't have to pay maintenance fees, can access their own money and make savings plans, and only need to deposit $25 to get started. The UTMA account has an $8 monthly fee you can get waived if you maintain a $500 minimum daily balance, and it requires a $100 deposit to open.
  • Alliant Credit Union: The joint savings account for kids at Alliant Credit Union comes with a competitive interest rate and a small gifted initial deposit. You can waive fees if you choose to get statements online only. The account comes with an ATM card for easier deposits, and the credit union offers educational finance videos for kids.
  • Fifth Third Bank: Designed to reward your child for saving their money, Fifth Third Bank's two joint accounts for minors offer bonuses for meeting savings goals and don't require monthly fees for minors. The Goal Setter Savings option gives a one-time bonus, while the Relationship Savings option offers monthly bonuses if you maintain a checking account as well.

Gathering What You'll Need

The information and documents needed for opening a savings account for a child can vary by bank, but you can expect to provide information for both you and your child. While you'll want to check the specific bank's website or contact them beforehand, take a look at some of the most common items requested:

  • Identification: You'll usually need to show your state ID, driver's license or passport as the custodian or joint owner. Your child may show one of these documents if they have one or present alternative documentation like a school ID, Social Security card or birth certificate.
  • Personal information: The child savings account application will need the following for both you and your child: Social Security numbers, full legal names, birth dates, current addresses and phone numbers.
  • Initial deposit: Some banks, such as Capital One, make it easy to open a kids savings account with no deposit, while others make the initial deposit a small amount. This provides a good opportunity for your child to break open their piggy bank for some or all of the initial deposit.

Getting a Joint Savings Account

Depending on the bank you want to use for your child, you may get to handle the application process online by logging into an existing account, clicking an "apply" button or downloading a form that you can securely email. Fifth Third Bank, Alliant Credit Union and Capital One allow online applications, while Bank of America requires you to make an appointment or drop by a local branch.

For a joint savings account with your kid, you must fill out the application with both of your names, contact information, Social Security numbers, dates of birth, employment/student status and possibly security questions and citizenship details.

The application may also ask how you prefer to receive statements, whether you want an ATM card and whether you have a credit freeze in place. Along with reading account agreements and completing a tax form, you'll also be asked how you plan to make the first deposit, such as through check, cash or electronic funds transfer.

You and your child need to sign and date the application, but banks may have you sign for your child if they're under a certain age. If you applied online, you may need to submit handwritten signatures for both of you. If you apply in person, the bank will ask for your and your child's identification before opening your account. You receive documents with your account number and terms after the account is opened.

Getting a Custodial Savings Account

Whether you open a custodial account for your child online or in person, the process is similar to that of a joint savings account. This means the application requires your contact information, names and Social Security numbers for both the custodian and minor. You may be asked about your citizenship and residency, and you may need to choose a security question and set up preferences for money transfers, overdraft protection and ATM card access.

You'll also specify the initial deposit amount and method, review account and tax agreements and show appropriate identification. To avoid surprises later, pay close attention to the terms of the custodial account so that you understand the rules about proper use, tax issues and the transfer of the account when your child becomes an adult.

Only you will need to sign and date the application, as your child won't have any access until legal age. If you apply online, the bank may contact you for more information or for handwritten documents before setting up the custodial account. You can also expect to receive mailed account documents to review.