You can open a savings account for a grandchild in your name as custodian, or add them as a joint owner once they're old enough

The path depends on the child's age. If your grandchild is under 18, you'll open a custodial account (also called a minor account) in your name as the adult custodian, with the child named as the beneficiary. You control the account until they reach the age of majority—18 or 21, depending on your state and the account type. If your grandchild is already 18 or older, they can open their own account, or you can open a joint account where you both own it equally.

Most banks and credit unions offer these accounts with no minimum opening deposit, though some require $25 to $100. The account earns interest on the balance, and the money stays yours to manage until the child takes over. No special paperwork beyond what the bank requires is needed to set one up.

Key Takeaways

  • A custodial account lets you open and control a savings account for a grandchild under 18, with the money passing to them automatically when they reach adulthood.
  • You'll need the child's Social Security number, proof of your identity, and proof of address to open the account at a bank or credit union.
  • The account earns interest, and you can deposit money whenever you want—there's no limit on how much you can save.
  • Once the child reaches the age of majority (18 or 21, depending on your state), the account becomes theirs to control, and you lose access.
  • If your grandchild is already 18, they can open their own account, or you can both open a joint account together.

What you need to open a custodial account

Bring two pieces of identification—a driver's license, passport, or state ID card works. You'll also need proof of your current address, usually a utility bill or lease dated within the last 60 days. The bank will ask for your Social Security number and your grandchild's Social Security number.

If you don't have your grandchild's Social Security number, you can request one from the Social Security Administration before opening the account, or some banks will let you open the account and add the number later. Ask the bank whether they'll hold the account open while you get it.

You do not need the child's parent or guardian's permission to open a custodial account in most states, but some banks ask for a parent's contact information. Check with your bank first if you think this might be an issue.

The difference between custodial accounts and joint accounts

A custodial account is in your name as custodian, with the grandchild as the beneficiary. You have complete control while they're a minor. When they turn 18 or 21 (depending on your state and account type), the account legally becomes theirs, and you lose access. You cannot take the money back or prevent them from withdrawing it.

A joint account is owned equally by both of you from the start. Either person can withdraw money or close the account without the other's permission. Joint accounts work best if your grandchild is already 18 and you want to help them manage money together, or if you want them to have access to the account before they reach adulthood. The downside is that they can empty the account at any time.

If your grandchild is under 18 and you want them to have some access to the money before adulthood, a few banks offer custodial accounts that let the child make withdrawals with your permission, but you still control the account.

How much you can save and what happens to the money

There is no legal limit on how much money you can put into a custodial account for your grandchild. You can deposit $50 one month and $5,000 the next. The money earns interest based on the account's rate, which varies by bank and account type—some savings accounts earn very little interest, while high-yield savings accounts earn more.

The money in the account belongs to your grandchild for tax purposes, even though you control it. This means interest earned on the account may be taxable income to the child, not to you. The tax rules are complex and depend on how much interest is earned and the child's other income, so ask a tax professional if you're saving a large amount.

When your grandchild reaches the age of majority, the account becomes theirs completely. You cannot tell them how to spend it, and you have no legal claim to it. Some grandparents have the conversation with their grandchild about what the money is for before that happens, but legally you have no way to enforce it.

Where to open the account

Most banks and credit unions offer custodial savings accounts. You can open one at your current bank if you already have an account there, or you can shop around. Some banks offer higher interest rates on savings accounts than others, so it's worth comparing a few options.

Online banks often have higher interest rates than traditional banks, and many let you open a custodial account entirely online. You'll upload photos of your ID and your grandchild's Social Security card or number, and the account opens in a few days. In-person banks let you walk in with your documents and open an account the same day.

Credit unions sometimes offer better rates or lower fees than banks, but you have to be a member to open an account. If you're not already a member, you can usually join by opening an account or making a small deposit.

What happens when your grandchild turns 18 or 21

The exact age depends on your state and the type of account. Most custodial accounts convert to a regular account in the child's name when they turn 18. Some states use age 21 for Uniform Transfers to Minors Act (UTMA) accounts. The bank will notify you before the conversion happens, usually a few months in advance.

Once the account converts, your grandchild has full control. You can no longer make deposits, withdrawals, or decisions about the account. If you want to keep saving for them after that point, you would need to open a separate account in your own name, or they would need to agree to a joint account.

Some grandparents use this moment to have a conversation with their grandchild about money management, or to help them set up a plan for the account. But legally, once they turn 18 or 21, it's entirely their choice what to do with it.

Tax and financial aid considerations

Money in a custodial account counts as the child's asset for financial aid purposes, which can reduce the amount of college financial aid they're offered. The impact is usually smaller than if the money were in a parent's account, but it's worth knowing about if college is part of your plan.

If you're receiving means-tested benefits like Supplemental Security Income (SSI) or Medicaid, putting money into a custodial account in your grandchild's name does not affect your benefits. The money belongs to the child, not to you. However, if your grandchild is receiving SSI or Medicaid, a large custodial account could affect their benefits, so check with their benefits administrator first.

Frequently Asked Questions

Can I take money out of my grandchild's custodial account if I need it?

Legally, no. The money belongs to your grandchild, even though you control the account. Taking money out for your own use is considered a violation of your duty as custodian and could have legal consequences. You can use the account only for the child's benefit—education, medical care, living expenses, and similar needs.

What if my grandchild's parent objects to the account?

In most states, you can open a custodial account without the parent's permission. However, family conflict can arise. If the parent is the child's legal guardian, they may have questions about the account or how the money will be used. Having a conversation about your intentions can prevent misunderstandings later.

Can I name someone else as custodian if something happens to me?

You can name a successor custodian when you open the account, or update it later. If you die or become unable to manage the account, the successor takes over. Ask your bank what their process is for naming and updating a successor custodian.

Does opening a custodial account affect my grandchild's credit score?

No. A savings account does not appear on a credit report and does not affect credit score. Credit scores are based on borrowing and repayment history, not on savings accounts.

What if my grandchild is adopted or I'm not the biological grandparent?

You can open a custodial account as long as you have a legal relationship to the child—biological, adoptive, or legal guardian. You'll need the child's Social Security number and proof of your identity. The bank may ask for documentation of your relationship, so bring any legal papers you have.