How Do I Open a Savings Account for My Grandchild?

To open a savings account for a grandchild, pick the account type that fits your goal, gather ID and Social Security numbers for both you and the child, loop in a parent or legal guardian (most banks require it), and complete the application with an opening deposit. The whole thing can usually be done in one branch visit or a single online session once you have the paperwork together.

Pick the Account Type Before Anything Else

The account structure decides who controls the money, when your grandchild gets access, how the interest is taxed, and how the balance is treated for college financial aid. Three options cover almost every situation.

Custodial Accounts (UGMA and UTMA)

Accounts set up under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act are the most common route. You open the account as custodian and manage the money, but your grandchild is the legal owner of every dollar in it, and withdrawals must be for the child’s benefit.¹ UGMA accounts hold cash and financial securities; UTMA accounts can also hold other property such as real estate.²

Two rules matter before you deposit a dollar. Contributions are irrevocable: once the money is in, it belongs to the child and you cannot take it back. And your grandchild gains full control at the age set by your state’s law, usually 18 or 21, though some states let the custodian set an age as late as 25 when the account is created.² No court filing is involved. The child simply becomes the sole owner when they hit that age.

Joint Savings Accounts

A standard joint savings account puts both names on the account and lets either holder deposit or withdraw. It is more flexible than a custodial account, but the child may also have withdrawal rights depending on the bank and their age, and there is no legal rule reserving the money for the child. If you want a simple shared account and are not worried about long-term control, this can work. If you want the funds locked in for the child, it is the wrong tool.

529 Education Savings Plans

If the point of the account is college, a 529 plan usually beats a plain savings account. Earnings grow tax-free, and withdrawals are tax-free for qualified education expenses, including tuition, fees, books, room and board at eligible colleges, and up to $10,000 per year for K–12 tuition at public, private, or religious schools.³ Computer equipment and internet access used during enrollment also qualify.

A grandparent-owned 529 also gets favorable treatment for financial aid. Under FAFSA rules in effect since the 2024–2025 academic year, distributions from a grandparent-owned 529 are no longer reported as student income and no longer reduce need-based aid eligibility. Custodial accounts, by contrast, count as the student’s asset and are assessed at 20% in the federal aid formula.⁴

What to Bring to the Bank

Federal rules require the bank to collect four pieces of information for everyone associated with a new account: full legal name, date of birth, a residential address, and a taxpayer identification number, which for U.S. citizens is a Social Security number.⁵ You need all of that for both yourself and your grandchild.

For yourself, bring an unexpired government-issued photo ID such as a driver’s license or U.S. passport.⁵ For your grandchild, have their Social Security number (the card itself is ideal but not always required) and their birth certificate. Banks often ask for the birth certificate to confirm the family relationship when a grandparent, rather than a parent, is opening the account.

You Will Probably Need a Parent Involved

This is where many grandparents run into a wall. Most banks require a parent or legal guardian to be the custodian on a minor’s account, or at least to provide written consent before a grandparent can open one. Policies vary. Some banks let a grandparent serve as custodian directly; others insist on a parent. Call the bank before you visit and ask specifically whether a grandparent can open a custodial account without the parent present. If a parental signature is required, arranging it ahead of time saves a wasted trip.

If you are the child’s legal guardian, bring the guardianship documentation. That usually satisfies the bank without a separate parental signature.

Completing the Application

Most banks accept both online and in-branch applications. On the form, you will be listed as the “custodian” for a UGMA or UTMA account, or as a joint owner for a joint account, with your grandchild as the minor beneficiary or co-owner. Get these designations right the first time; they drive the legal and tax treatment of the account.

Enter your grandchild’s Social Security number carefully. The bank uses it to report interest under the child’s tax profile rather than yours, and a typo can freeze the application and cause IRS problems later. After you submit, the bank’s compliance team runs a verification check that can take a few business days. You should receive a reference number to check status in the meantime.

Making the First Deposit

You can usually fund the account by transferring from your own checking account, writing a check, or depositing cash at a branch. Minimum opening deposits vary but generally fall between $25 and $100. Electronic transfers clear in a few business days. Once the deposit posts, you can manage the account online or in person, and many grandparents set up a small recurring monthly transfer to build the balance steadily.

Tax Rules Once the Account Is Open

Gift Tax

Every dollar you put in counts as a gift for federal tax purposes. In 2026, you can give up to $19,000 per recipient without filing a gift tax return.⁶ A married couple can combine their exclusions for $38,000 per grandchild per year. Going over the threshold does not automatically create a tax bill, but it does require IRS Form 709.

A 529 plan allows a special five-year election: you can front-load up to five years of the annual exclusion at once, roughly $95,000 per grandparent in 2026, reported as spread across five years, with no additional gifts to that beneficiary during the period without exceeding the exclusion.

Kiddie Tax on Interest

Interest earned in a custodial account is unearned income taxed under your grandchild’s Social Security number. For 2026, the first $1,350 of unearned income is tax-free, the next $1,350 is taxed at the child’s own (usually low) rate, and anything above $2,700 is taxed at the parent’s marginal rate.⁷ This “kiddie tax” applies to children under 18, and to full-time students under 24 whose earned income does not cover more than half their support.

For a modest savings balance, the kiddie tax rarely bites. If you plan to contribute large amounts, watch the $2,700 line. A 529 plan avoids the issue because earnings are tax-free when used for qualified education expenses.

Effect on College Financial Aid

If your grandchild will apply for federal student aid, the account type has real consequences. Money in a UGMA or UTMA is treated as the student’s asset on the FAFSA and assessed at 20%: every $10,000 in the account raises the expected family contribution by about $2,000.⁴

A grandparent-owned 529 is not reported as an asset on the FAFSA, and distributions from it are no longer counted as student income under rules in effect since the 2024–2025 academic year. One caveat: some private colleges use the CSS Profile for institutional aid, and the CSS Profile still asks about 529 funds from any source.³

FDIC Coverage

Money in a custodial savings account is covered by FDIC insurance, and the child, not the custodian, is treated as the owner for insurance purposes. The account is insured up to $250,000 as the child’s single account, separate from any other accounts the custodian holds at the same bank.⁸

1
Cornell Law School. Uniform Gifts to Minors Act (UGMA)
2
Cornell Law School. Uniform Transfers to Minors Act
3
Internal Revenue Service. 529 Plans: Questions and Answers
4
Federal Student Aid. Student Aid Index (SAI) and Pell Grant Eligibility
5
eCFR. 31 CFR 1020.220 – Customer Identification Program
6
Internal Revenue Service. Estate and Gift Tax Updates
7
Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed
8
FDIC. Single Accounts