To open a savings account for a child, a parent or legal guardian applies with the bank on the child’s behalf, since minors can’t sign binding contracts themselves. Bring a government photo ID, the child’s birth certificate, and Social Security numbers for both of you. The paperwork takes 15 to 30 minutes. The harder part is picking the account structure, because that choice locks in who controls the money, how the interest is taxed, and how much the balance will hurt financial aid later.
Pick the Account Type First
Three structures work for a child, and they aren’t interchangeable. Once money is deposited, switching is difficult or impossible, so the decision belongs at the front of the process.
Joint Savings Account
A joint account lists you and your child as co-owners. Either of you can deposit or withdraw, and the bank treats you both as having equal access to the full balance.1Wells Fargo. Options for Kids Savings Account It’s the simplest option and gives you the most ongoing control. The trade-off is that the child also has withdrawal access, so a teenager could in theory clean out the account without your sign-off.
Custodial Account (UTMA or UGMA)
A custodial account under the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act works on a different principle. The child legally owns every dollar, and you manage the funds as custodian, with a fiduciary duty to spend them only for the child’s benefit.1Wells Fargo. Options for Kids Savings Account The child cannot withdraw while you’re custodian, but two features surprise most parents.
First, every deposit is an irrevocable gift. You can’t take the money back, redirect it to a sibling, or use it for your own expenses. Spending custodial funds on anything that doesn’t benefit the child is a breach of fiduciary duty and can create legal liability. Second, when the child reaches the transfer age set by your state (usually 21, though it ranges from 18 to 25 in most states, and a few states allow up to 30 if the donor specifies at account creation), the full balance transfers to them with no conditions.
529 College Savings Plan
If college is the goal, a 529 has the strongest tax treatment. Earnings grow tax-free, and withdrawals for qualified education expenses like tuition, room and board, books, and required fees aren’t subject to federal income tax.2Office of the Law Revision Counsel. 26 USC 529 – Qualified Tuition Programs Non-education withdrawals trigger income tax on the earnings plus a 10% federal penalty.
You keep control of a 529 indefinitely. You can change the beneficiary to another family member, and the child never gains automatic access at a set age. Since 2024, SECURE Act 2.0 also allows rolling unused 529 funds into a Roth IRA for the beneficiary, up to $35,000 over a lifetime, provided the 529 has been open at least 15 years and each year’s rollover stays within the annual Roth IRA contribution limit.2Office of the Law Revision Counsel. 26 USC 529 – Qualified Tuition Programs
What You Need to Bring
Federal rules require the bank to verify the identity of everyone tied to the account.3eCFR. 31 CFR 1020.220 – Customer Identification Program Requirements for Banks Have these ready for both yourself and your child:
- Social Security numbers for both of you, used as taxpayer identification numbers for IRS reporting.
- A driver’s license or U.S. passport for the adult opening the account.
- Proof of the child’s identity and age, most commonly a birth certificate. Some banks accept a passport or other government document.
- Full names, dates of birth, and physical addresses. A P.O. box won’t satisfy the address requirement.
Many children’s savings accounts have no minimum opening deposit or set it as low as $1, but check your bank’s rules before you start.
How the Application Works
Most national banks and credit unions let you apply online, at a branch, or sometimes by phone. Online is faster: you upload documents and enter the required information, and the bank’s system checks it against identity databases in real time. At a branch, an officer reviews your documents in person and has you sign a signature card formalizing the account agreement.
After you submit, the bank runs the identity verification required under federal anti-money-laundering law.4Financial Crimes Enforcement Network. FinCEN Order – Customer Identification Program Clean applications with matching documents often finish within a business day. A flagged discrepancy, such as a name mismatch between the Social Security card and birth certificate, can take several business days to sort out. Once verification clears, the account goes active and you’ll receive account details along with instructions for online or mobile access.
How the Interest Is Taxed
Interest earned in a child’s account is taxable income, and the IRS applies what’s commonly called the “kiddie tax” to keep parents from parking large investment returns in a child’s name. For the 2026 tax year, the thresholds are:5Internal Revenue Service. Revenue Procedure 2025-32
- First $1,350 of unearned income: tax-free.
- Next $1,350: taxed at the child’s own lower rate.
- Anything above $2,700: taxed at the parent’s marginal rate.
These rules apply to children under 18, and in some cases to full-time students under 24 whose earned income doesn’t cover more than half their own support.6Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed For a basic savings account earning a few hundred dollars a year, the kiddie tax won’t matter in practice. It starts to bite when custodial accounts hold substantial investment balances.
If your child’s only income is interest and dividends totaling less than $13,500, you can elect to report it on your own return using IRS Form 8814 instead of filing a separate return for the child.7Internal Revenue Service. Instructions for Form 8814 – Parents Election to Report Childs Interest and Dividends It’s simpler, but it can slightly raise your tax bill because the first $1,350 that would be tax-free on the child’s return gets taxed at your rate instead. If your child’s unearned income exceeds $2,700, file Form 8615 to calculate tax owed at your rate.8Internal Revenue Service. 2025 Instructions for Form 8615 – Tax for Certain Children Who Have Unearned Income
The Effect on College Financial Aid
Account type matters more here than most parents expect. The FAFSA formula assesses parent-owned assets at up to 5.64% of their value, so about $564 of every $10,000 in parent assets is expected to go toward college costs each year. Student-owned assets are assessed at 20%, so the same $10,000 reduces aid eligibility by $2,000.
Custodial UTMA and UGMA accounts count as student assets, because the child is the legal owner. A $50,000 custodial balance reduces aid by roughly $10,000, compared with about $2,820 for the same funds in a parent-owned account. A 529 plan owned by a parent for a dependent student is treated as a parent asset and assessed at the lower rate. Joint savings accounts where the parent is also an owner are generally reported as parent assets. If financial aid is a priority, custodial accounts are the least favorable place to build a large balance.
What Happens When the Child Turns 18 (or 21)
A joint account is the easiest transition. Most banks convert it to a standard adult savings account, and you can remove yourself as co-owner if you want. Nothing forces a transfer.
A custodial account works differently. Once the child reaches the transfer age under state law, you are legally required to hand over the full balance, with no strings attached. The child gets unrestricted access, and nothing you do as former custodian can delay or condition that transfer. It’s worth factoring in before you fund a custodial account heavily: a 21-year-old who suddenly controls $80,000 won’t always spend it the way you’d hope.
A 529 stays under your control indefinitely. You can leave it open, change the beneficiary to a younger child, or use the Roth IRA rollover if the funds aren’t needed for education. That flexibility is why 529 plans are the most forgiving choice when a child’s plans change.