Opening a savings account for your grandchild is a great way to help them establish a strong financial foundation. However, you’ll have to provide certain information to do so, and some of it may be difficult to obtain since you’re not the child’s parent.
If you’re considering savings accounts for grandchildren, this guide will provide you with the steps and requirements for opening one and give you tips on the best savings accounts for grandchildren.
Can I Open a Savings Account for My Grandchild?
The short answer is yes—you can open custodial or joint savings accounts on your grandchild’s behalf. These accounts require you to manage and fund them until your grandchild reaches adulthood and becomes the official account owner.
While some custodial accounts require a legal guardian to open and fund the account, this typically refers to accounts that come with a debit card. Most other custodial accounts allow grandparents to fund their grandchild’s account the same way their parents can.
However, if your grandchild is 18 (21 in some states) or older, you can also help them open a non-custodial savings account and deposit funds into it to help them save more money.
Can I Open a Savings Account for My Grandchild Without a Birth Certificate?
Most financial institutions require you to provide your grandchild’s personal information, which typically includes a birth certificate and a Social Security number (SSN). Still, this requirement varies depending on your bank, so some banks may allow you to open an account without your grandchild’s birth certificate.
However, you’ll probably still need other types of ID or documentation, especially if you’re your grandchild’s legal guardian or have their parents’ consent to start an account.
If you can’t obtain your grandchild’s birth certificate, you may open a joint or custodial account if they’re a minor. Identification checks are generally less stringent for these types of accounts.
What Information Do You Need To Open a Savings Account for Grandchildren?
Most financial institutions require the following information when you want to open a joint or custodial savings account for your grandchild:
- The grandchild’s SSN, full name, address, and birth date
- Your SSN, full name, address, birth date, and contact information
- Your driver’s license or passport as proof of identity
However, if your grandchild is of legal age and you want to help them collect funds by funding their personal, traditional savings account, the bank will only require the grandchild’s personal information.
How To Open a Savings Account for a Grandchild
Once you decide to open a savings account for a grandchild, take the following steps to ensure the account opening process goes smoothly:
- Choose a bank account—Decide on a bank/credit union where you want to open an account based on the account’s interest rates, minimum deposit requirements, and the age at which your grandchild will be allowed to gain ownership of the custodial/joint account
- Gather the required information—Ask your bank what information you need to open the account and gather the data in advance to make the opening process more efficient
- Complete the application—Apply for the savings account either online or in person by providing the required information, such as your contact details, address, and tax identification number (TIN)
- Fund the account—After checking if your bank has any initial deposit requirements, make the first deposit and keep funding the account by depositing a check or using a bank or wire transfer
In some cases, the bank or credit union may require your grandchild to be present when you’re opening the account, but this depends on your financial institution.
What Is the Best Savings Account for a Grandchild?
The savings account you choose to fund on your grandchild’s behalf depends on various factors. The main two aspects at play are your grandchild’s age and the purpose you want to help them save for. Based on these factors, the best savings accounts for grandchildren include:
- Custodial UGMA/UTMA accounts
- Joint savings accounts
- Custodial Roth IRAs
- Educational savings accounts
- High-yield savings accounts with strong security features
Custodial UGMA/UTMA Accounts
Uniform Gifts to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA) are custodial accounts you open and control on your grandchild’s behalf until they turn 18 or 21. You can open these accounts through a bank or a brokerage account, and they let you hold cash, stocks, bonds, and mutual funds.
The money held in these accounts is subject to tax, but it’s taxed at the child’s rate, which is lower than the grandparents’ tax rate. Once the child gains possession of the funds, they can use them for whatever they like.
Joint Savings Accounts
While a custodial savings account belongs to your grandchild, and you’re the one managing it, joint accounts provide you and your grandchild with equal ownership of the account, and you can both fund it.
However, if your grandchild is a minor, you can still supervise and manage the account as the adult. For example, you can limit the amount of money your grandchild can withdraw, which is a great opportunity to teach them money management and monitor their spending habits.
Custodial Roth IRAs
A custodial Roth IRA is a tax-advantaged retirement account you manage and fund until the minor reaches adulthood. These accounts work like regular Roth IRAs, but you can withdraw any contributions you make to this account tax and penalty-free at any time.
The contribution limit for a custodial Roth IRA in 2024 is $7,000. However, your grandchild is only eligible for this account if they earn taxable income.
Educational Savings Accounts
Educational savings accounts allow you to deposit money into your grandchild’s account specifically to help them cover education expenses. The two most popular options include:
- 529 plans—These are tax-advantaged accounts you can fund with no yearly contribution limit and use to cover qualified expenses throughout your grandchild’s entire education
- Coverdell ESA—You can open this account on a minor’s behalf and fund it with up to $2,000 per year. The withdrawals are tax-free if used for education-related expenses, and your grandchild must use the funds by the time they turn 30
High-Yield Savings Account With Strong Security Features
If your grandchild recently graduated high school or college, you can ensure they enter adulthood with a solid financial foundation. The funds you prepared for your grandchild can safely grow in a high-yield savings account, especially if it comes with strong security features.
Young adults who lack financial knowledge or experience are frequently targeted by scammers. Their presence on social media, including Facebook, Instagram, and TikTok, makes the younger generation susceptible to sophisticated online scams.
By choosing a savings account with fraud protection on behalf of your grandchild, you can help them save, earn interest, and never lose money to scams.
The only savings account that offers these benefits is FortKnox—a one-of-a-kind online banking platform specializing in protecting savings from bad actors.
