A minor generally cannot open a savings account alone, but a child of almost any age can have one with a parent or legal guardian on the account. People under eighteen lack the legal capacity to enter a binding contract in nearly every state, and a bank account is a contract.1Cornell Law Institute. Legal Age So the practical question is not whether your child can have a savings account, but which structure to use and who signs.
Why an Adult Has to Be on the Account
Because a minor’s signature on a contract can be voided at the minor’s discretion, banks require a legally accountable adult. That adult is either a joint owner or a custodian, and the choice changes who owns the money.
Federal identification rules reinforce the same point. Under the Customer Identification Program, when a parent opens an account for a child, the parent is the bank’s customer for identity-verification purposes.2Financial Crimes Enforcement Network. FAQs Final CIP Rule Some institutions will let an older teen open an account independently, in which case the minor is the customer and the bank verifies the teen’s identity directly. Either way, someone’s identity is fully confirmed before the account opens.
Joint Account or Custodial Account
Banks offer two main structures for a child’s savings, and the differences matter more than the interest rate.
Joint Accounts
A joint account makes the adult and the minor co-owners. Either party can deposit or withdraw, and the balance is generally treated as shared property. This works well for teaching a teenager to manage money in real time.
The trade-off is control and exposure. The adult, as a full owner, can withdraw the entire balance without the child’s permission. And because the law typically presumes equal ownership, a creditor with a judgment against the adult may be able to freeze or seize funds in the account, even money the child deposited. Some states cap creditor access at half the balance; others allow the full amount. Tracing specific deposits back to the child is possible but rarely easy.
Custodial Accounts (UGMA and UTMA)
Custodial accounts created under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act work differently. The money belongs to the child from the moment it’s deposited, and the adult serves only as a custodian managing the funds on the child’s behalf.3Legal Information Institute. Uniform Gifts to Minors Act (UGMA) UGMA accounts hold cash and securities; UTMA accounts can also hold tangible property such as real estate.
Because the child is the legal owner, contributions are irrevocable gifts. You can’t take the money back. The custodian is held to a prudent-person standard and must manage the account solely for the child’s benefit. Gifts to a custodial account fall under the annual gift tax exclusion, which is $19,000 per recipient for 2026, so contributions up to that amount don’t trigger any federal gift tax reporting.4Internal Revenue Service. Whats New Estate and Gift Tax
What You’ll Need to Open the Account
Banks must collect a name, date of birth, address, and taxpayer identification number for each person on the account.5Federal Deposit Insurance Corporation. FFIEC BSA AML Examination Manual Customer Identification Program For most people the taxpayer identification number is a Social Security number. If the child doesn’t have one, an Individual Taxpayer Identification Number or a passport number with country of issuance is accepted at many institutions.6Consumer Financial Protection Bureau. Can I Get a Checking Account Without a Social Security Number or Drivers License
The adult needs a valid government-issued photo ID such as a driver’s license or passport. Verification for the child is more flexible. Because children rarely have government-issued photo IDs, banks can accept a birth certificate, a school ID, or a teacher’s confirmation of identity under the risk-based verification rules.2Financial Crimes Enforcement Network. FAQs Final CIP Rule
You’ll also certify your taxpayer identification number and confirm whether you’re subject to backup withholding, usually on Form W-9. Providing an incorrect number or skipping the form can trigger automatic withholding on any interest the account earns.7Internal Revenue Service. Backup Withholding
Most banks let you apply online or in person. Applying in person can help if the child’s identification is nonstandard. An initial deposit is usually required, commonly $25 to $100. Many youth savings accounts waive monthly maintenance fees outright, or waive them for account holders under a certain age. Compare fee structures before you commit: some accounts charge a monthly fee unless you keep a minimum balance or set up automatic transfers, and others charge nothing regardless of balance.
How Interest on the Account Is Taxed
Interest earned in a child’s savings account is taxable income, and the IRS has specific rules for how it gets reported.
When the Child Has to File
A dependent child with unearned income above $1,350 is generally required to file a federal tax return.8Internal Revenue Service. Dependents Standard Deduction and Filing Information A typical savings account earning modest interest rarely hits that threshold on its own. Add a custodial brokerage account throwing off dividends and the numbers can add up.
The Kiddie Tax
When a child’s unearned income exceeds $2,700, the excess is taxed at the parent’s marginal rate rather than the child’s lower rate.9Internal Revenue Service. Topic No 553 Tax on a Childs Investment and Other Unearned Income Kiddie Tax This applies to children under nineteen, or under twenty-four if they’re full-time students.
Reporting the Child’s Income on Your Return
If the child’s only income is interest and dividends totaling under $13,500, you can elect to report it on your own return using Form 8814 instead of filing a separate return for the child. That’s simpler but slightly more expensive — up to $135 extra, because the first $1,350 that would otherwise be tax-free gets taxed at 10% under this election.10Internal Revenue Service. Instructions for Form 8814 For small savings balances, the convenience usually wins.
What Happens When the Child Grows Up
Joint accounts don’t change automatically at any age. The adult and the now-adult child remain co-owners until someone takes action, usually by closing the joint account and opening an individual account in the young adult’s name, or by removing the parent if the bank allows it.
Custodial accounts do change. Once the child reaches the termination age set by state law, the custodian must transfer full control to them. In most states that age is eighteen or twenty-one, and some states allow the custodian to specify a later age up to twenty-five when the account is created.11Social Security Administration. POMS SI SEA01120.205 The Legal Age of Majority for Uniform Transfer to Minors Act UTMA At that point the custodian’s authority ends and the young adult gets unrestricted access to the funds. There is no way to extend the custodianship or place conditions on how the money is spent after the transfer.
One Thing to Know if College Aid Is on the Horizon
The account structure affects federal financial aid. Because UGMA and UTMA accounts legally belong to the child, they’re reported as student assets on the FAFSA and assessed at a 20% rate. Parent-owned assets are assessed at a much lower effective rate, up to about 12% of discretionary net worth after an asset protection allowance.12Federal Student Aid. Student Aid Index SAI and Pell Grant Eligibility A $10,000 custodial balance could reduce aid eligibility by roughly $2,000 per year. If you’re saving specifically for college and expect to apply for need-based aid, a parent-owned 529 plan has a smaller impact on eligibility than a custodial account.