How to Open a Savings Account for a Baby
You can always create a savings account in your name with the funds earmarked for a baby—but opening the account in your newborn's name provides not only a savings vehicle but a great gift and financial literacy tool as your child grows.
The process is straightforward enough but requires some preparation.
Setting Up the Account
Children under the age of 18 are not legally allowed to sign documents. As a result, you'll need to open the account with your name on it as well. When the child turns the appropriate age (18, or 13 if you convert it to a checking account), you can go to the bank and remove your name.
While your child is still a minor, however, you will have control of the account. You will have the ability to make withdrawals, deposits, or close it if needed.
Most banks have no problem including a child's name on an account if a parent will also be listed on the account. But the institution will want some confirmation of legal responsibility for the child. You should plan on showing your baby's birth certificate, and you will need both of your Social Security numbers to open the account.
Savings accounts often carry fees, but ways to get around them do exist. Start by talking to the bank you currently use. They may let you link this new account to your other accounts, allowing you to avoid fees or minimum balance requirements.
Otherwise, seek out a financial institution with low or no fees. Some banks waive charges provided a certain number of deposits are made to the account each month.
Another option is to choose an account that offers no service charges if a minimum balance is maintained—and to make that sum your initial deposit. You might reap some tax benefits by officially gifting the sum to your baby, which involves setting up the account as a Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account.
Bear in mind that funds deposited in these custodial accounts are irrevocable gifts and can be withdrawn only under certain more restrictive circumstances.
Online banking is great for adults, but you will eventually want to take your child to visit the bank where the money is. Choosing a bank that is close to home will allow your growing child to make regular deposits and start to appreciate the value of saving. This approach will also familiarize your child with banking services, and other alternatives to strictly online interaction with a financial institution.
The interest on many savings accounts is low. The best rates are often available from local credit unions, which also often offer the additional advantage of having no fees. Discuss options with your local banks that might provide you with more favorable interest rates or tax advantages.
You can also move the funds into a more attractive certificate of deposit or investment account as the amount grows, allowing your child to earn more interest on the savings.
California Legislative Information. "Family Code - FAM §6701 - Capacity to Contract." Accessed April 8, 2020.
Wells Fargo. "Kids Savings Account." Accessed April 8, 2020.
Wells Fargo. "Teen Checking: A Guide to Your Common Checking Account Fee," Page 1. Accessed April 8, 2020.
Bank of America. "Child Savings Accounts." Accessed April 8, 2020.
Wells Fargo. "Way2Save® Savings." Accessed April 8, 2020.
Bank of America. "Personal Schedule of Fees," Page 6. Accessed April 8, 2020.
Bank of America. "Custodial (UTMA) Savings Account for Children." Accessed April 8, 2020.
National Credit Union Administration. "Credit Union and Bank Interest Rate Comparison." Accessed April 8, 2020.