Kids Savings Accounts: A Complete Guide for Parents

Teaching kids to be financially responsible is a parenting imperative — and opening up a savings account in their name is a great place to start.

Tailored specifically for young savers, the best savings accounts for kids provide unparalleled opportunities to learn first-hand about money, goal-setting and the advantages of saving.

Here’s everything you need to know before you get started.

Table of Contents

• How do kids savings accounts work?
• What is the right age for a child’s savings account?
• Types of kids savings accounts
• Pros and cons of kids savings accounts
• Main things to know before opening a kids savings account
• How to open a savings account for your child
• Tips for managing your kid’s savings account
• Kids savings accounts FAQs

How do kids savings accounts work?

Savings accounts for children operate much the same as those for adults, with a few bonus features to help young savers (and their parents) track and monitor their progress.

Be sure to do a little research on the types of accounts offered by banks and credit unions beforehand — terms and conditions can vary significantly. Some financial institutions, for instance, require the child to be present when opening an account; others do not.

What is the right age for a child’s savings account?

You can open a savings account for your kid at any age, starting from birth. But if the goal is to use the account as a learning tool, it’s probably best to wait until they’re in elementary school, and can understand basic money management concepts (like “needs” vs. “wants”).

Types of kids savings accounts

Traditional savings accounts

Most parents who open up a savings account for their kid go through a bank or credit union — often, one they’re already a customer at.

These accounts often have lower minimum balance requirements and more affordable maintenance fees than their adult accounts. If you go this route, you and your child will have joint ownership — and shared involvement — of their savings account.

Before opening an account, ask about the minimum opening deposit, monthly maintenance fees, mobile banking availability and whether the account comes with a debit card. Some banks and credit unions also offer interactive tools to help children develop healthy savings habits; a useful resource for parents who want to give their kids a comprehensive financial education but don’t know where to start.

Custodial accounts

Online savings accounts continue to grow in popularity, thanks to their convenience and competitive interest rates.

Most provide custodial accounts for minors — meaning parents and guardians are the only ones who can access and manage the account until the child turns 18 or 21 (depending on the state).

Custodial accounts — also known as Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts — allow parents to open investment accounts for their kids. They have different tax implications and withdrawal restrictions compared to traditional savings accounts, though, and you’ll probably get a better interest rate if you open an account under your name instead.

Again, it’s worth doing some research before taking the plunge. Some banks and credit unions also offer these types of accounts, and, conversely, some online banks allow kids and their parents to open up joint accounts.

Education savings accounts

If the goal of the account is to help your child save for higher education, you might consider a 529 plan.

This option, which is specifically designed for education expenses, lets kids and their parents grow funds tax free (as long as the money is used for qualifying expenses). Once they’re off to college or a trade school, your child can open up a separate student bank account.

Pros and Cons of kids savings accounts

As with any financial product, savings accounts for kids have both advantages and disadvantages:

Pros Explained

Financial literacy

These accounts can serve as a valuable tool for teaching children the importance of saving money, budgeting and making smart financial decisions.

Goal-setting

Savings accounts let children set financial goals, like saving for a toy, a special event or their future education — all the while instilling a sense of discipline and responsibility.

Interest accumulation

Most savings accounts accrue interest over time, which helps kids understand the concept of compound interest while watching their money grow.

Accessibility

In many cases, both you and your child can access their savings account online, which enables kids to monitor their savings and make deposits/withdrawals under parental supervision.

Cons Explained

Minimum balance requirements

Some financial institutions require savers to make a minimum starting deposit or to maintain a certain balance.

Limited access

Custodial accounts require parents to approve or confirm transactions, limiting a child’s access to their funds.

Fees

Some accounts come with fees. Carefully review the fee structure of every potential account before signing up for one.

Main things to know before opening a kids savings account

Here are a few need-to-know details for anyone considering opening up a savings account for a child:

Eligibility and age requirements

Banks and other financial institutions have varying eligibility criteria for kids savings accounts. You can open certain types of accounts for your child from birth, but some companies have age requirements if you want it to be under your child’s name (and not your own.)

Account ownership

At most banks, a parent or guardian can open up a savings account for their child as a joint account holder. Like a joint checking account, this arrangement allows you to oversee and manage the transactions your kid makes until they reach the age of maturity in your state (usually 18).

Required documentation

These include, but aren’t limited to, a driver’s license or other photo ID, proof of address, birth certificates and social security numbers for you and your child.

Minimum balance requirements

If applicable, you’ll have to meet a predetermined minimum balance requirement to avoid fees and/or maintain account privileges. Choose an account that realistically aligns with your child’s capacity to save.

Interest rates and fees

Interest rates vary among financial institutions. Compare the rate and fee structure of competing companies to find an account that maximizes earnings.

How to open a savings account for your child

Opening a kids’ savings account is a straightforward process, typically involving the following steps:

• Research, compare and decide: Explore different banks and financial institutions to find the savings account that suits you and your child’s needs. Consider the varying interest rates, monthly fees and perks — like online budgeting tools — that each account offers.

• Gather necessary documents: Collect the required documentation for yourself and your child, including photo IDs,, social security cards and proof of address.

• Visit the bank or apply online: Many banks offer the convenience of applying online; others require an in-person visit.

• Activate the account: Review the terms and conditions carefully before signing.

• Fund the account: Once the account is open, make an initial deposit to activate it. You can deposit using cash, a check or an electronic bank transfer.

Tips for managing your kid’s savings account

Here are a few tips to help your child develop positive money habits.

• Set savings goals: Encourage your child to set short-term and long-term savings goals. This will help motivate them to stay committed to a savings plan.

• Regularly review the account: Monitor the account balance with your child, discuss their progress and offer guidance.

• Teach budgeting skills: Help your child learn basic budgeting skills by allocating a portion of their savings for spending, saving and charitable giving. Teach them about emergency funds and the importance of balancing financial responsibilities.

• Utilize educational resources: Take advantage of online educational resources provided by the FDIC and trusted news sources (like the one you’re reading now) to level-up your child’s financial literacy.