Opening a savings account for a baby or a child can be a good way to begin teaching good money habits. Your child might already know about bank accounts from books or TV. But if they ask where money comes from or how to have their own, they might also be ready for a savings account.
A savings account provides your child with a glimpse into how banks and credit unions work and gives them a place to stash allowance and birthday money. It also gives them the opportunity to grow their money with interest.
Here are answers to common questions about savings accounts for kids.
Your child is most likely old enough for a savings account. Kids’ savings accounts typically require a parent or guardian to have joint ownership or control. That means you can manage the finances until your child is ready to manage them. Because of that setup, your child probably won't have to meet a minimum age requirement to open an account. You could even open a savings account for a baby.
The best kid savings accounts have a few features in common, including strong savings rates. Bank accounts typically require an adult to apply, so a standard account in a parent or guardian’s name — even if it isn’t marketed to kids — could be an option. Keep an eye out for the following:
No minimum balance requirement or monthly maintenance fees
Saving should be a good thing. Don’t let fees diminish what your child puts into their account.
An above-average interest rate
The national average savings rate is currently 0.47%. At some of the biggest national banks savings rates are even closer to zero. But many credit unions and online banks offer better yields. The more interest an account earns, the faster your child’s bank balance can grow.
Easy online access
Check for features such as mobile apps with high ratings in the app stores, electronic statements and a solid website where you can check your transactions. The ability to accept mobile check deposits and make transfers from linked accounts is also a plus.
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How do I open a savings account for a baby or child?
Opening a savings account for your child isn't much different from getting a new account yourself. As the adult, you’ll need identifying information, such as a driver’s license, passport or other government-issued photo ID. You’ll also need to provide basic information for both of you, including your and your child’s birthdays and Social Security (or taxpayer identification) numbers.
Some banks will require a minimum opening deposit, such as $25. Others don’t have any minimum opening deposit.
Should my child also use a debit card or banking app?
There’s no need to rush to open additional accounts if you feel your child isn’t ready. But if your child is at a point where they to make regular purchases from merchants and can begin to practice budgeting, a kid-focused debit card or banking app could be a solid option. They have features similar to online checking accounts, such as the ability totrack spending, set budget goals and set up transfers. Parents or guardians can open these accounts on behalf of their children, and are able to set spending limits and keep tabs on purchases.
Lifelong lessons
Learning good saving and spending habits are valuable life lessons, and they take time to learn. Opening a savings account for your child is one of the best ways to introduce these concepts at an early age.
Yes, opening a savings account for a baby is something you can do even if they're still a newborn. Traditional banks, credit unions, and online banks can offer savings account options for babies and kids. You can also explore savings account alternatives, such as 529 college savings plans or custodial accounts.
For example, you can open a 529 College Saving Plan as soon as your baby is born, and you'll give your child 18 years of potential growth they can later tap into for college tuition and expenses. The Coverdell Education Savings Account is another great option to save money for your child's future education.
The account opening form will have to be filled up along with the KYC details. In this case, the age proof of the minor along with the parent's Aadhar and PAN card will be required to open the account. So, take the first step to inculcate financial lessons to your child.
Most banks require a child to be at least seven before they can open an account for themselves, though they do all differ, so it's worth checking the specifics. Under-sevens require a parent, guardian or grandparent to set up an account and act as signatory. This method can also be selected for older children.
Custodial brokerage account: This is a brokerage account established under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA) and managed by a parent or guardian on a child's behalf.
For a newborn, Cramer recommended parents set up a Uniform Gifts to Minors Act account, or UGMA. "When a child is born, think about setting up a Uniform Gifts to Minors account, and put index funds or individual stocks in there," Cramer said.
If you want to teach your child basic money management habits, a children's savings account will be better. If your goal is to save for a child's education, you'd likely be better off with a 529 plan or a Coverdell Education Savings Account.
If you'd like to handle your child's assets with as few complications as possible until they reach adulthood, we recommend a savings account for young people or a gift savings account in the child's name. Children's accounts offer better interest rates and are for saving, not for making regular withdrawals.
You can open some types of savings accounts as soon as your child is born and has a Social Security number (SSN), such as a 529 college savings account. Some key moments that may inspire you to open one include when: You want to start saving for their college. Friends and family give monetary gifts.
Generally, a child must be at least 18 years of age to open a bank account on their own, with some variability by state. However, there are several options that allow children and teens to access the banking experience before 18 with an adult cosigner or custodian.
Introduction: My name is Velia Krajcik, I am a handsome, clean, lucky, gleaming, magnificent, proud, glorious person who loves writing and wants to share my knowledge and understanding with you.
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