How to Open a Savings Account for a Child: Custodial vs. Joint

To open a savings account for a child, an adult — usually a parent, grandparent, or legal guardian — picks an account type (joint or custodial), brings identification and tax ID numbers for both themselves and the child, completes the bank’s application, and makes an initial deposit. Minors generally can’t enter binding contracts on their own, so a responsible adult has to be on the account. The type you choose decides who controls the money, how the interest is taxed, and whether the balance could cut into financial aid later.

Choose Between a Joint and Custodial Account

This is the first real decision, and it shapes everything that follows.

Joint Savings Account

A joint account lists you and the child as co-owners with equal rights to deposit and withdraw. For FDIC insurance purposes, each co-owner’s interest is assumed equal unless bank records say otherwise.¹ You keep full access for the life of the account, and nothing requires you to hand over control when the child turns 18. It’s simpler, but the money isn’t legally set aside for the child; either owner can empty the account at any time.

Custodial Account (UGMA or UTMA)

Custodial accounts operate under state versions of the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act. An adult serves as custodian and manages the money, but the child is the legal owner from the first deposit, and every deposit is an irrevocable gift. When the child reaches the age set by state law — usually 18 or 21 — the custodian must transfer full control, and the child can spend the money however they want.²

The custodian has a fiduciary duty, meaning the funds can only be used for the child’s benefit. Spending custodial money on personal expenses, or on obligations the adult should be covering from their own income like basic child support, can result in a court ordering full repayment with interest and attorney’s fees. That legal constraint doesn’t apply to joint accounts.

Documents and Information You’ll Need

Federal law requires banks to verify the identity of everyone associated with a new account. Section 326 of the USA PATRIOT Act sets the baseline: financial institutions must follow reasonable procedures to confirm who you are before opening any account.³ Have the following ready before you start:

Government-issued photo ID for the adult. A driver’s license or passport is the most common form accepted.⁴
Tax ID numbers for both the adult and child. A Social Security number or an Individual Taxpayer Identification Number works for either party. An SSN is not required; an ITIN is equally acceptable, and some banks will also accept a passport number or alien identification card number.⁴
A physical street address. Federal rules require a residential or business street address, not a P.O. box.⁵
Proof of the relationship. Banks commonly ask for the child’s birth certificate or legal guardianship papers to verify the adult’s authority over the account. No single federal rule names a specific document, but most banks want something.

Applying Online or at a Branch

Many banks accept online applications for minor savings accounts, but the process is more involved than for an adult account. Federal privacy rules under the Children’s Online Privacy Protection Act restrict online collection of personal information from children under 13; websites and online services must obtain verifiable parental consent before gathering a child’s data.⁶ Some banks handle this by requiring parents to finish the application in person, especially for younger children. If you start online, expect the bank to verify your identity digitally and either approve the account or ask you to visit a branch to finalize it.

Funding the Account

Once the application is approved, the bank will ask for an initial deposit. Many children’s savings accounts open with a small amount, sometimes zero, though some banks set minimums of $5 to $25. Common funding methods:

Electronic transfer. Link an existing checking or savings account and send money through an ACH transfer, which typically takes one to three business days.
Mobile check deposit through the bank’s app.
Cash or check at a branch for same-day credit.

Monthly maintenance fees on children’s savings accounts are typically low or waived. Read the fee schedule before you open the account; some banks waive fees only while the child is under a certain age or while the balance stays above a minimum.

How the Interest Gets Taxed

Interest earned in a child’s account is taxable income. Banks must file a Form 1099-INT for any account that earns $10 or more in interest during the year.⁷ Amounts under $10 are still taxable; the bank just isn’t required to report them.

The Kiddie Tax

A child’s unearned income — interest, dividends, capital gains — is taxed under special rules designed to prevent parents from sheltering income in a child’s name. For 2026:⁸

The first $1,350 is covered by the child’s standard deduction, so no tax is owed.
From $1,351 to $2,700, the money is taxed at the child’s own rate, typically 10%.
Anything above $2,700 is taxed at the parent’s marginal rate, which is often significantly higher.⁹

The kiddie tax applies to children under 18, and to children aged 18 (or full-time students under 24) whose earned income doesn’t cover more than half their own support.⁹ A basic savings account rarely hits the $2,700 threshold on its own, but it matters if your child also has custodial investment accounts or other unearned income.

Reporting on Your Return

If the child’s only income is interest and dividends and the total is between $1,350 and $13,500 for 2026, you can report it on your own tax return using IRS Form 8814 instead of filing a separate return for the child.⁸ This simplifies filing but may raise your tax bill slightly, since income between $1,350 and $2,700 is taxed at a flat 10% under this election.

Gift Tax

Deposits into a custodial account are gifts to the child. For 2026, you can give up to $19,000 per recipient per year without filing a gift tax return, and married couples can combine for $38,000 per child per year.¹⁰ Deposits into a joint account where the adult retains ownership rights are generally not treated as completed gifts.

How the Account Could Affect Financial Aid

The account type can meaningfully affect your child’s eligibility for need-based aid. The FAFSA formula treats student-owned assets more harshly than parent-owned assets.

Custodial accounts under UGMA or UTMA are reported as the student’s assets on the FAFSA, regardless of dependency status.¹¹ Student assets are assessed at a 20% conversion rate; every $10,000 in a custodial account raises the expected family contribution by $2,000. Parent-owned assets are assessed at 12% and benefit from an asset protection allowance that shields a portion of savings entirely.¹²

A joint account where the parent is the primary owner is generally reported as a parent asset, with the lower assessment rate. If aid eligibility is a priority, think about this before choosing an account type, especially for larger balances. Once money is in a custodial account, you can’t move it back to a parent-owned account.

Who Can Withdraw the Money

With a joint account, either co-owner can withdraw any amount at any time without needing the other’s permission, and there are no legal restrictions on how the money is spent. Some banks have age-based policies that prevent a minor from making withdrawals independently until a certain age such as 16 or 18, but those are bank policies, not legal requirements.

With a custodial account, only the custodian can access the funds, and only for the child’s benefit. The custodian has broad discretion over what qualifies: education expenses, medical bills, extracurricular activities, and other costs that serve the child. The custodian cannot use the money to cover obligations they’d otherwise pay from their own income, such as basic child support. Courts have ordered custodians who misused funds to repay the full amount plus interest and attorney’s fees. The custodian must also keep records of transactions and make them available for review.

When Control Passes to Your Child

Custodial accounts have a built-in expiration date for adult control. When the child reaches the age set by state law, usually 18 or 21, with some states allowing an extension, the bank must transfer full control to the now-adult child.² At that point no restrictions remain on how the money is spent. This is a fundamental feature of custodial accounts, not a quirk: the child is the legal owner, and the custodianship is only a temporary management arrangement.

Joint accounts work differently. Both owners keep access indefinitely, and there is no automatic handover at any age. That gives you ongoing oversight, but the money is never legally separated from your own assets the way a custodial account would be.

1
FDIC. Joint Accounts
2
HelpWithMyBank.gov. What Is a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) Account?
3
FinCEN. USA PATRIOT Act
4
Consumer Financial Protection Bureau. Can I Get a Checking Account Without a Social Security Number or Driver’s License?
5
Financial Crimes Enforcement Network. Customer Identification Program Rule – Address Confidentiality Programs
6
eCFR. 16 CFR Part 312 – Children’s Online Privacy Protection Rule
7
Internal Revenue Service. About Form 1099-INT, Interest Income
8
Internal Revenue Service. Revenue Procedure 2025-32
9
Office of the Law Revision Counsel. 26 U.S. Code 1 – Tax Imposed
10
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
11
Federal Student Aid. Current Net Worth of Investments, Including Real Estate
12
Federal Student Aid. 2026-27 Student Aid Index (SAI) and Pell Grant Eligibility Guide