Yes, you can open a savings account for your grandchild, but how depends on their age

You can open a savings account in your grandchild's name at most banks and credit unions, but the rules change based on whether they are under 18 or already an adult. If your grandchild is a minor, you will be the account owner and custodian — they cannot legally own the account themselves. Once they turn 18, they can open and own their own account, though you can still contribute money to it if they allow you.

The most common route for young children is a custodial savings account, which you set up at a bank or credit union in your grandchild's name with yourself listed as the custodian. The money belongs to your grandchild legally, but you control it until they reach the age of majority — usually 18 or 21, depending on your state and the account type.

If your grandchild is already 18 or older, the process is simpler: they can walk into a bank or apply online and open a regular savings account on their own. You can then transfer money into that account whenever you choose, and they will have full control of it.

Key Takeaways

  • A custodial savings account lets you open an account in your grandchild's name while you control the money until they reach adulthood, usually 18 or 21.
  • You will need your grandchild's Social Security number and birth certificate, plus your own ID and Social Security number, to open a custodial account.
  • Most banks and credit unions offer custodial accounts with no minimum balance or low minimums, though some have age limits on when the account must be transferred to the grandchild.
  • Money in a custodial account belongs to your grandchild for tax purposes, which may affect their financial aid if they later attend college.
  • If your grandchild is 18 or older, they can open a regular savings account themselves, and you can contribute to it without being listed as the owner.

What documents you need to open a custodial account

To open a custodial savings account, bring your grandchild's birth certificate and Social Security number, along with your own government-issued ID and Social Security number. Some banks will also ask for proof of address — a utility bill or lease in your name works for this. Call the bank or credit union ahead of time to confirm what they require, because requirements vary slightly between institutions.

If you do not have your grandchild's Social Security number yet, you can request one from the Social Security Administration. You will need the child's birth certificate and proof of citizenship or legal residency. This process takes a few weeks, so plan ahead if you are opening the account soon after birth.

You do not need permission from your grandchild's parents to open a custodial account in most states, but it is a practical courtesy to tell them what you are doing. Some banks may ask whether the parents consent, particularly if there is a custody dispute or if the child's parents are also customers at that bank.

How custodial accounts work until your grandchild turns 18

Once the account is open, you can deposit money whenever you want and withdraw it for expenses that benefit your grandchild — school supplies, medical bills, sports equipment, or anything else that is reasonably for their use. You control all the decisions: how much to deposit, when to withdraw, and how the money is spent. Your grandchild can see the account balance if the bank allows it, but they cannot withdraw money or make transfers without your permission.

The account earns interest on the balance, which is taxed as your grandchild's income, not yours. This is actually a tax advantage in many cases: if the interest is small enough, your grandchild may owe no tax on it at all because of the standard deduction. Talk to a tax professional if the account balance is large or if your grandchild has other income.

Some banks set an age at which the account automatically converts to a regular account in your grandchild's name — often 18, sometimes 21. When this happens, your grandchild gains full control and you lose access unless they add you as an authorized user. Check the bank's terms before you open the account so you know when this transfer will happen.

Where to open a custodial account

Most major banks offer custodial savings accounts: Chase, Bank of America, Wells Fargo, and others all have them. Credit unions often offer custodial accounts too, and some credit unions have lower fees or higher interest rates than large banks. You can also open a custodial account at online banks like Ally or Marcus, though you will do everything by mail or phone rather than in person.

Compare a few options before you choose. Look at the interest rate the account pays, any monthly fees, the minimum balance required to open the account, and the age at which the account converts to your grandchild's name. Some banks charge a monthly fee if the balance falls below a certain amount; others charge nothing. A few online banks pay higher interest on savings accounts than traditional banks, which means your grandchild's money grows faster.

If you are already a customer at a bank or credit union, opening a custodial account there is often easiest — you can do it in person or online without starting from scratch. But do not choose a bank just because you use it; if another institution offers better rates or lower fees, the difference adds up over years.

Tax implications of money in a custodial account

The money in a custodial account is your grandchild's property for tax purposes, even though you control it. This means any interest the account earns is taxed as your grandchild's income. In 2024, a dependent child owes no federal income tax on the first $1,450 of unearned income (interest, dividends, and similar earnings). Above that, the income is taxed at your grandchild's rate, which is usually lower than yours.

There is a catch if your grandchild later attends college: money in a custodial account counts as the student's asset when calculating financial aid. Schools expect students to use their own assets to pay for college before they give out aid, so a large custodial account can reduce the amount of aid your grandchild receives. If college funding is a major goal, talk to a financial aid counselor about whether a custodial account or a different savings method makes sense for your situation.

Custodial accounts do not affect Social Security, Medicaid, or other government benefits in most cases. But if your grandchild receives means-tested benefits — aid that depends on having low income or assets — a large custodial account could affect their may be able to access. Check with the benefit program directly if this applies to your grandchild.

Alternatives if a custodial account does not fit your situation

If you want to save for your grandchild but do not want to open an account in their name, you can open a regular savings account in your own name and simply earmark the money mentally for them. This keeps the money under your full control and avoids any tax or financial aid complications. The downside is that the money is legally yours, so it could be affected if you face creditors or legal judgments.

A 529 college savings plan is another option if education is your main goal. You open the account in your name but name your grandchild as the beneficiary. You control the money, but it is meant for college expenses. The account grows tax-free as long as the money is used for may have access to education costs. If your grandchild does not attend college, you can transfer the account to another family member or withdraw the money (though you will owe taxes and a penalty on the earnings).

Some grandparents also use a trust or a will to leave money to grandchildren, which gives you more control over when and how the money is used. This requires a lawyer and is more complex than a savings account, but it can be worth it if you are planning a large gift or if you have concerns about how your grandchild's parents might spend the money.

What happens when your grandchild turns 18

When your grandchild reaches the age of majority — 18 in most states, 21 in a few — the custodial account converts to a regular account in their name. The exact process depends on the bank. Some banks automatically transfer ownership and send your grandchild a new debit card and online access. Others require your grandchild to come in person or sign paperwork to claim the account. Check with your bank about their specific process a few months before the conversion date.

Once the account is in your grandchild's name alone, you no longer have access to it unless they add you as an authorized user. They can withdraw all the money, close the account, or keep it open — it is entirely their choice. This is why it matters to teach your grandchild about saving and money management before they turn 18, so they understand what the account is and why you opened it.

If you want to continue helping your grandchild save after they turn 18, you can transfer money into their account, give them cash, or help them open a joint account if the bank allows it. But you will not have the same control you had when they were a minor.

Frequently Asked Questions

Do I need the parents' permission to open a custodial account for my grandchild?

In most states, no — you can open a custodial account in your grandchild's name without the parents' consent. However, it is considerate to tell the parents what you are doing. Some banks may ask about parental consent, especially if there is a custody dispute or if the parents are also customers at that bank.

What if my grandchild's parents want to control the money instead of me?

You can add a parent as a joint owner or authorized user on the account after it is opened, which gives them access and control. Alternatively, you can close the account and help the parents open their own custodial account instead. The choice depends on your family situation and what you want the money to be used for.

Can I open a custodial account if my grandchild lives in a different state?

Yes. Most banks allow you to open a custodial account online or by mail, regardless of where your grandchild lives. You will need their birth certificate and Social Security number, plus your own ID. Some banks have branches in multiple states, which can make the process easier, but online banks work just as well.

What happens to the money if I die before my grandchild turns 18?

The money in the custodial account belongs to your grandchild, not to your estate. However, someone will need to be named as the successor custodian to manage the account until your grandchild reaches adulthood. Talk to the bank about naming a successor custodian when you open the account, and make sure that person knows about the account and where to find the paperwork.

Can my grandchild have more than one savings account?

Yes. Your grandchild can have a custodial account you open for them and also have their own account once they turn 18. Some families open multiple accounts for different goals — one for college, one for a car, one for general savings. Each account earns interest separately, so compare rates if you are splitting money across multiple banks.