At What Age Can a Child Have a Savings Account?
Short answer
A child can have a savings account at any age, but typically an adult must open and manage the account until the child reaches the age of majority, usually 18. These accounts are often called custodial or joint accounts and help teach children about saving money early on.
What is a Child Savings Account?
A child savings account is a bank account specifically designed to help children save money. Since minors cannot legally enter into contracts, an adult—usually a parent or guardian—opens the account on the child’s behalf. The adult manages the account until the child reaches the legal age to take control, often 18, but this can vary by state. These accounts allow children to deposit money, earn interest, and practice basic money management with adult supervision.
The account often has features tailored to kids, such as no minimum balance requirements or no monthly fees. Some institutions provide educational tools to teach saving habits. The main purpose is to encourage saving from a young age and to build a foundation for financial literacy.
How Does a Child Savings Account Work?
Opening a child savings account typically involves the adult providing their identification and the child’s Social Security number. The adult co-owns the account or acts as custodian, overseeing deposits, withdrawals, and account management. The child can often make deposits or withdrawals with permission.
Hypothetical example:
If a parent opens a custodial savings account for a 7-year-old, they might deposit $50 to start. Over the year, the child deposits $5 weekly from allowances or gifts, adding up to about $260. The bank pays interest, say 1% annually, so the child ends up with $310 plus a small amount of interest. The parent uses this to teach the child about saving and watching the balance grow.
When the child turns 18, they gain full control and can decide how to use the money, such as paying for college or buying their first car.
Why Does Having a Savings Account for a Child Matter?
Opening a savings account early helps children develop good financial habits. It teaches delayed gratification, budgeting, and the concept of earning interest. These lessons build a strong foundation for responsible money management later in life.
For parents, it also provides a safe place to store gift money, allowances, or earnings from chores. The funds are protected by federal insurance, meaning the money is safe even if the bank has financial trouble. Additionally, having an account in the child’s name can help establish their financial identity, which is useful when applying for credit or financial aid later.
What Age Requirements Apply to Child Savings Accounts?
Legally, there’s no minimum age to have a savings account, but banks require an adult to open and manage it if the child is a minor. Some banks allow accounts for children as young as newborns, while others might set a minimum age of 0 to 13 for certain account types.
The adult is responsible for the account until the child reaches “age of majority,” which ranges from 18 to 21 depending on state laws. At that point, the child becomes the sole owner. It’s important to check the specific policies of your bank or credit union and your state’s laws to understand the exact age when control transfers.
What Terms Are Often Confused with Child Savings Accounts?
People often confuse child savings accounts with other accounts such as:
- Custodial accounts (UTMA/UGMA): These are investment accounts managed by an adult for a minor, holding stocks or bonds rather than just savings.
- Joint accounts: Both adult and child share equal ownership and access, which might not be ideal for all families.
- Prepaid cards or kid-friendly debit cards: These are not savings accounts but spending cards linked to an adult account.
- 529 college savings plans: These are education savings accounts with tax advantages, different from regular savings accounts.
Understanding these differences helps parents choose the best option for their child’s financial goals.
How Can Parents Open a Savings Account for Their Child?
Parents or guardians can open a savings account for a child by following these steps:
- Research banks or credit unions that offer child savings accounts with favorable terms like no fees and competitive interest rates.
- Gather required documents: adult’s ID, child’s Social Security number, and proof of address.
- Visit the bank in person or online to complete the application.
- Fund the account with an initial deposit, which can be a small amount.
- Set up online access and teach the child how to check balances and make deposits.
- Use the account regularly to deposit gifts, allowances, or earnings and discuss how saving helps reach goals.
What Should Parents Do Next After Opening the Account?
Once the account is active, parents should involve the child in managing it by:
- Setting savings goals together, like buying a toy or saving for college.
- Tracking deposits and interest earned monthly.
- Encouraging regular deposits from allowances or gifts.
- Explaining bank statements and how interest works.
- Gradually letting the child take more responsibility as they mature.
When the child approaches the age of majority, parents should prepare them for full account control. This might include teaching how to use a debit card, withdraw money safely, or transfer funds to other accounts.
Opening a savings account early and making it a practical tool for learning can set children up for a lifetime of smart money habits.
For more detailed information, see Can a Kid Have a Savings Account?, Kids Savings Account Age Requirements, and Should I Have a Savings Account for My Child?.
Frequently asked questions
Can a newborn have a savings account?
Yes, newborns can have savings accounts, but an adult must open and manage the account until the child reaches the legal age of majority. Many banks offer accounts specifically for minors, allowing parents to start saving early on their behalf.
When does a child gain full control of their savings account?
Typically, a child gains full control at the age of majority, usually 18, but it can be 19, 20, or 21 depending on state laws. At that point, the account ownership transfers fully to the child without adult oversight.
Can the child withdraw money anytime from a custodial savings account?
No, in custodial accounts the adult custodian controls withdrawals. The money must be used for the child’s benefit, and the custodian manages the funds until the child is legally an adult.
Are savings accounts for children insured?
Yes, child savings accounts at banks are insured by the FDIC up to the standard limits, and credit union accounts are insured by the NCUA, ensuring the child’s money is safe even if the bank or credit union fails.
What’s the difference between a child savings account and a custodial investment account?
A child savings account is a simple bank account earning interest, while a custodial investment account holds stocks, bonds, or mutual funds. The latter carries investment risks and potential growth but is more complex.
Can a child have a checking account before 18?
Some banks allow minors to open checking accounts with a parent or guardian as a co-owner or custodian, often starting around age 13. These accounts help teach spending and budgeting skills but usually have restrictions on transactions.