What is the best bank to open savings account for child? It’s no secret that every parent wants to see their children grow up to have as much financial stability as possible…and one of the ways that you can help your child to achieve their full potential is by teaching them about money while they’re still young enough to want to listen to your advice.
Opening a custodial savings account in their name as well as in yours is a great way for you to keep tabs on their account functionality until they reach the age of 18, and at the same time, gives you the chance to help them learn how to save money.
Furthermore, it can provide you (and them) an easy way to save towards educational expenses, or any other significant purchases your child will want to eventually make.
However, not all bank account for kids are the same, so it is definitely worth shopping around to see which banks have the best perks, offers or convenience options depending on your individual situation.
In this article, we’ll break down a checklist of items you will want to consider before choosing a bank or banking product.
We’ll also give you the top 3 child savings accounts based on the latest consumer research and account information.
How Do I Choose The Best Bank Savings Account for My Child?
It seems like the simplest answer to choosing the “best” bank may be to just open up an additional savings account at the bank you’re already doing business with for your own checking and savings — but that could cause you and your child to miss out on offers or perks that might make their initial savings experience not only informative, but lucrative as well.
There are many factors that go into deciding which bank you want to use for a savings account for your child. Here are a few that we think you will want to consider:
- Does the bank have physical branches or is it online-only?
- While both of these options are certainly viable in today’s technologically advanced world, you may have a preference on the type of banking you want to teach your child about first. The proximity of a branch to where you live is important when opening a bank account for a child. While online banking might be perfect for adults, banks give children limited access to these platforms. As your child grows older, visiting a branch to make deposits and withdrawals could also be beneficial for them to witness.
- We suggest finding a bank that blends both in-person banking as well as online banking so that you are able to teach them both.
- What are the requirements to open the account?
- Is there a minimum deposit amount? Will they check your credit score? What information will you need to supply to the bank in order to open the account?
- Are there any on-going fees associated with the account?
- Some accounts will charge ongoing monthly or yearly service (or maintenance) fees. And although you may be able to waive them by meeting depository requirements or maintaining a minimum monthly balance, sticking to a “free” option might be what you would prefer for your child.
- Does the account offer Automatic Deposit?
- Do you want to be able to deposit money into your child’s account each month without having to remember to? Then, automatic deposit will be an important feature for you!
- In fact, assuming a typical 2% interest rate, a deposit of just $10 weekly, contributed over 18 years with a starting balance of $100, will turn into about $11,500 by the time your kid turns 18… and you could do all of that saving without even having to think about it if you do select an “automatic deposit” feature! 😉
- What is the interest rate and annual percentage yield (APY) on the account?
- You’ll want to consider the interest rate, APY, and how often it compounds. Higher interest and APY can help your child earn more money back on the funds they are keeping in their account.
- You may find that 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 as well as and kid-friendly educational tools for them to learn more about banking.
- Are there any taxes or government regulations to consider?
- If your child earns more than $2,100 in interest in a year, they may have to pay taxes. If that interest is their only income and it is less than $10,500, a parent can just include it on their own tax return.
- But, if your child makes more than $10,500 a year in interest, you’ll have to file a tax return in their name.
- Are there any educational tools available?
- Ask if the bank has some kid-friendly educational tools to help your child learn about what it takes to achieve financial success.
- Are there withdrawal limitations?
- Some accounts will let the child withdraw money as they grow up, while others won’t allow withdrawals until they’re at least 18 years old.
How To Open A Savings Account For A Child
The account set up procedure for minors can be different based on the bank. But, generally you’ll need to visit a physical branch location with your child to open an account.
The account will be opened in both the parent and child’s name (since children under the age of 18 are not legally allowed to sign documents).
In other words, while your child is still a minor, you will control the account and have the option to make deposits, withdrawals, or (if necessary) close the account.
When the child turns 18, you can go to the bank and remove your name permanently.
Here is a list of items you will need to open a child savings account:
- Firstly, your child’s Social Security number and date of birth
- Secondly, Parent/ Guardian picture identification (such as your driver’s license)
- Thirdly, Personal details such as your address, email address, and date of birth
- Lastly, your initial deposit, including cash or checks
Since your child won’t be able to open the account without a parent/guardian present, show up ready to help. In other words, be prepared to sign any required legal documents on your child’s behalf.
It is also important to know:
Before the account can be set up, they may also run a credit check on the parent/guardian.
Top 3 Banks to Open Savings Account For Child
The Bank Professor team rated over 90 banks and scored each institution based on their APY, financial education tools, monthly fees, minimum deposits and current customer reviews.
1. Capital One
Capital One currently offers a competitive 0.50%APY on their Kids Savings account. There is no maintenance fee and no minimum opening deposit required. Capital One allows children and their parents to set up savings goals and automatic saving plans. The bank’s website has a portal called Kids Savings Account: 101, which features educational tools to help kids lean how to save. Their mobile apps also come highly rated.
However, there are only 755 branch locations across the United States, so it may be a hassle to find a location close to you if you aren’t near a major city.
If you and your child open a Capital One Savings, when your child reaches 8 years old, they have the option of opening an accompanying CHECKING account. While a savings account will be a good way to show your child how to save money, the Capital One checking account can help them learn how to manage and spend money responsibly.
Then, once your child turns 18, their account can be converted into a Capital One 360 Performance Savings – which has a significant APY of 1.50%.
Capital One has a product lineup that truly “grows” with your child through the various stages of their life.
2. Bank Of America
Bank of America offers a minor savings account that is jointly owned by the child and a parent/guardian. The minimum opening deposit is only $25. The APY is 0.03%, which is better than most brick-and-mortar banks (but still lower than the national average of 0.09%). There are no monthly fees and they have 4,300 branches across the United States. Bank of America has a highly rated mobile app available on Apple and Android and educational materials readily available for parents to help their kids learn about saving money.
3. Wells Fargo
Wells Fargo has several options for setting up a savings account for your child. You can open a joint ownership, minor by or UTMA/UGMA account. The Wells Fargo Kids Savings Account only requires a $25 minimum opening deposit. It doesn’t have a monthly service fee for account holders who are under 18 (age 19 in Alabama). Wells Fargo also has a Student Center on its website offering a variety of educational financial tools. Their mobile app is highly rated. Parents can also make free online transfers or create a savings match program to help their child’s savings grow. It is easy to visit a branch in person, as they have approximately 8,050 branches (as of 2018.) However, the APY on Wells Fargo’s savings account is only 0.01%. So, the money will not grow significantly if it’s just sitting in the account.
Learning financial responsibility takes time and there are many benefits of opening a savings account for a child.
For example, you can teach them how to:
- use basic math skills.
- not waste their money.
- understand how valuable money is.
- plan ahead.
- save for the things they want until they can afford it.
- stay focused on goals and priorities.
- use compounded interest to grow their money faster.
- learn how to deposit a check and withdraw money responsibly.
No matter which option you choose, make sure to compare banking institutions to make sure you’re opening an account that can offer the most educational opportunities, forgiveness, perks or growth based on the needs of you and your child.
Alternatives to a Child Savings Account
If you don’t want a savings account for your child, but need a way to save money for them…
Here are a couple alternatives that you may want to consider.
529 Plans are a special savings account for education-related expenses such as tuition, meal plans, computers, textbooks, etc. Through this type of plan, you’ll receive investment growth and tax advantages that are similar to retirement accounts. They can be a great way for you to help set your child up for success.
Certificates of Deposit (CDs)
Certificates of deposit can be gifted to a child if you list yourself as the account custodian. CDs tend to earn higher interest rates than savings accounts. And, the guaranteed rate means you’ll know how much your gift will be worth when it finally matures. They’ll need to wait until they’re the age of majority before they can access the funds within the CD.
Education Savings Account (ESA)
Coverdell ESAs get no special tax treatment from the states, but federal taxes are deferred. The IRS doesn’t tax withdrawals as long as they are used for qualifying education expenses. What’s also great is that ESAs have little to no impact on your child’s eligibility for additional financial aid – even if your child is the owner of the account.
Are you a parent/guardian wanting to earn a bit more on the money your investing in a savings account?
As of August 2020, here are some rates from competitors that you may want to check out:
- First Foundation Bank Online Savings – 1.20% APY
- Vio Bank – 1.11% APY
- Citi Accelerate – 1.10% APY
- CIBC Bank – 1.05% APY
- Goldman Sachs – Marcus Account – 1.05% APY
- Ally Bank – 1.00% APY
- American Express Personal Savings – 1.00% APY
- Aspiration Bank – 1.00% APY
- Capital One 360 Performance Savings – 1.00% APY
- Citizens Access – 1.00% APY
- CIT Bank Savings Builder – 0.95% APY
- Discover – 0.95% APY
- TAB Bank – 0.90 % APY
- Barclays Bank – 0.80% APY
- Synchrony Bank – 0.75% APY
- HSBC Direct – 0.70% APY
- MySavingsDirect – 0.65% APY
- TIAA Bank – 0.65% APY