How to Open a Custodial CD Account for a Minor

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Custodial accounts allow you to invest on behalf of a minor child. You retain managing control, but all funds in the account belong to the child. Once you make a deposit to the account, you may not withdraw any funds for your personal use or change the beneficiary on the account. The child takes full control of the account upon reaching the age of 18, 19 or 21, depending on your state laws.

Step 1

Gather the necessary identification documents for you and the child. You will need your driver's license or state identification card, the child's birth date and both of your Social Security numbers for tax reporting purposes. You may also be required to show the child's birth certificate as proof of the correct birth date.

Step 2

Contact a bank, broker or other financial institution to open an account. Request the paperwork for a new custodial account. Complete the forms according to the instructions. Make sure to list your name as the custodian and the child as the beneficiary of the account.

Step 3

Make a deposit to fund the account. The deposit procedure may vary among financial institutions. You may be required to bring in cash or a cashier's check if you do not already have an account at the same institution. If you do have an existing account, the bank may allow you to simply transfer funds from your account to the minor's account.

Step 4

Use the funds in the account to purchase one or more certificates of deposit, or CDs. Choose your CDs based on the length of the term and the interest rate. You will receive more interest as the term gets longer. Make sure you or the child will not need to cash out the CD before the expected maturity date. The account will be charged an early withdrawal penalty if you cannot wait until the CD matures. You can purchase several CDs with staggered maturity dates to give the child more investment flexibility in the future.


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