Yes, you can open a CD for your child at most banks and credit unions, typically by setting up either a custodial account under your state’s UTMA or UGMA law or a joint account that lists both of you as owners. You provide identification for yourself and your child, choose a term and deposit amount, and the bank does the rest. The structure you pick decides who legally owns the money, how the interest is taxed, and when your child gains full control.
Custodial Account or Joint Account
The choice between these two structures matters more than any other decision in the process.
Custodial Account Under UTMA or UGMA
A custodial CD is opened under the Uniform Transfers to Minors Act or the Uniform Gifts to Minors Act, which nearly every state has adopted in some form. The account is titled in your child’s name, and you serve as custodian. Your child is the legal owner from the moment you deposit the money, and the transfer is irrevocable. You cannot take the funds back, and you cannot use them for your own expenses or for basic parental obligations like food, clothing, or housing. The money has to be spent for your child’s direct benefit, such as education or medical care.
Joint Account
A joint CD names you and your child as co-owners with equal rights to the funds. You can manage deposits and handle the account without the transfer restrictions that apply to custodial accounts, because the money has not been irrevocably gifted. The tradeoff is that a joint account does not give you the same legal separation of assets a custodial account does.
What You Need to Open the Account
Federal anti-money-laundering rules require banks to collect a name, date of birth, address, and taxpayer identification number for each customer before opening an account. That means your child’s Social Security number plus basic identifying details, and for you an unexpired government-issued photo ID such as a driver’s license or passport.1eCFR. 31 CFR 1020.220 – Customer Identification Program Individual banks may ask for extras such as a certified birth certificate or proof of your address, so check with your institution before you go in.
Steps to Open and Fund the CD
- Compare CD products for term length, interest rate, and minimum deposit. Opening minimums often run from $500 to $2,500, though some banks have no minimum.
- Complete the application online or at a branch. Your child’s name and Social Security number go in the primary account holder fields; your information goes in the custodian or joint owner section.
- Fund the account by transfer from a linked bank account or by cashier’s check. The term begins once the deposit clears.
- Review the confirmation, which shows the interest rate, maturity date, and account number.
How the Interest Is Taxed
Interest a child earns on a CD counts as unearned income and is subject to the “kiddie tax” rules in the Internal Revenue Code.2Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed These rules cover children under 18, and in some cases full-time students under 24 whose earned income doesn’t cover more than half of their own support.3Internal Revenue Service. Topic No. 553, Tax on a Childs Investment and Other Unearned Income
For the 2026 tax year, the thresholds work like this:4Internal Revenue Service. Revenue Procedure 2025-32
- The first $1,350 is covered by the child’s standard deduction and is not taxed.
- The next $1,350 is taxed at the child’s own rate, which is usually low or zero.
- Anything above $2,700 is taxed at the parent’s marginal rate.
Most children with only CD interest stay in the first two tiers. The bank will issue a Form 1099-INT in the child’s Social Security number if annual interest reaches $10.5Internal Revenue Service. About Form 1099-INT, Interest Income
If the child’s only income is interest and dividends and the total is under $13,500 for 2026, you can report it on your own return using Form 8814 instead of filing a separate return for the child.4Internal Revenue Service. Revenue Procedure 2025-32 Doing so raises your adjusted gross income, which can affect deductions or credits, and the IRS suggests running the numbers both ways.6Internal Revenue Service. Instructions for Form 8814 At $13,500 or more, the election is off the table and the child files their own return using Form 8615.3Internal Revenue Service. Topic No. 553, Tax on a Childs Investment and Other Unearned Income
Early Withdrawal and Maturity
A CD locks the money in for its term, and taking it out early costs you a penalty. Federal rules set a floor of at least seven days’ simple interest on withdrawals in the first six days after deposit.7eCFR. 12 CFR Part 1030 – Truth in Savings (Regulation DD) There is no federal cap, and many banks charge several months of interest, with longer terms tending to carry steeper penalties.8HelpWithMyBank.gov. What Are the Penalties for Withdrawing Money Early From a Certificate of Deposit (CD)? Check the deposit agreement before you commit.
At maturity, most banks give you a grace period, typically 7 to 10 days, to withdraw or change terms without penalty. Do nothing and the bank will usually renew the CD automatically at the current rate for the same or a similar term. Put the maturity date on your calendar.
FDIC Insurance for Your Child’s CD
CDs at FDIC-insured banks are covered up to $250,000 per depositor, per bank, per ownership category.9FDIC. Deposit Insurance FAQs For a custodial CD, the child, not you, is treated as the owner, so the account is insured up to $250,000 as the child’s own, separate from anything you hold at the same bank in your name.10FDIC. Single Accounts A joint CD is covered under the joint account category, which provides up to $250,000 per co-owner at the same bank.
When Your Child Takes Control
For a custodial account, your role ends when the child reaches the transfer age set by your state’s law. The default is 21 in most states, though the range across states runs from 18 to 25, and a few states let the custodian specify a later age when opening the account. At that point you must transfer the account into the child’s name, and the child can withdraw, reinvest, or spend the money however they like.
A joint account has no formal transfer event because both owners already have access. The child can manage the account on their own once they meet the bank’s age requirements for solo account management.
Effect on College Financial Aid
A custodial CD can shrink your child’s financial aid package. The FAFSA treats UTMA and UGMA accounts as the student’s assets, not the parents’.11Federal Student Aid. Current Net Worth of Investments, Including Real Estate Student assets are assessed at a higher rate than parent assets in the aid formula, so the same balance held in a custodial CD may reduce aid more than it would in an account in your own name. If aid is a real factor for your family, weigh that against the tax and ownership benefits before you pick a structure.