Savings Accounts for Kids: What You Need to Know

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As a parent, you’re responsible for teaching your child many important life skills — including how to manage, save, and grow their money. One tool that could make these early financial lessons easier to communicate is opening a savings account for your child.

A savings account can provide hands-on opportunities to teach good financial habits to your offspring. This special type of deposit account can also help you communicate how banks and credit unions work, the benefits of earning interest, and the useful role that savings accounts can play in your child’s future life.

How a Kid's Savings Account Works

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A child’s savings account is a special type of deposit account a bank or credit union designed for minor children (typically under 18 years of age). They work like regular savings accounts, but can come with additional kid-centric perks.

Some unique features of a child's savings account can include:

• Parents can limit the child's account access
• Low or no monthly account fees
• Low or no opening balance requirements
• Financial literacy tools and resources online

Federal law does not place restrictions on how old a person must be to open a savings account. But unless you live in a state that specifically allows minors to open savings accounts in their names alone, most banks require that a responsible adult co-open the account.

Benefits of Opening an Account with Your Child

There can be several benefits to opening a joint savings account with your child. These types of deposit accounts may make it easier to:

• Keep an eye on your child’s savings and withdrawal activity. 
• Deposit funds into your child’s savings account (and allow others to do the same).
• Limit or avoid bank account fees, depending on the financial institution.

Once your son or daughter turns 18, your financial institution may allow you to convert a joint savings account to a traditional deposit account without limitations. If converting the account isn’t an option, you could always search for a different savings account or consider opening an additional student checking account at that time, depending on your child’s banking needs.

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What to Look for In a Child’s Savings Account

Many financial institutions offer children’s savings accounts, including large commercial banks, local banks, credit unions, and online banks. So, if you’re in the market for this type of financial tool for your child, you should have plenty of options to consider.

The best savings accounts for kids may have features such as the following.

High Annual Percentage Yield (APY)

The average national deposit rate for savings accounts was 0.42% as of June 2023, according to the Federal Deposit Insurance Corporation (FDIC). However, some of the best high-yield savings accounts feature interest rates over 12 times as high as the national average at the time of writing. Savings accounts for children often require a parent or guardian’s name on the account. So, even if a bank doesn’t market its high-yield savings account to children, it might be worth researching to find out if a joint account option is available.

No Fees

No one likes to lose a portion of their savings on monthly bank fees. As you’re searching for the right savings account for your child, it’s probably wise to look for options without added costs that could chip away at their savings balance.

User-Friendly App or Online Resources

One of the primary goals of opening a savings account for your child is to begin (or improve) their financial education. If you can find a bank that offers online resources or a well-designed mobile app, those types of tools could make your job much easier.

Savings Goals

Some savings accounts may allow your child to work toward multiple savings goals at once, and develop some good financial habits along the way. For example, your son or daughter could use this type of digital tool to put away funds for a long-term goal (like a new vehicle) and a smaller goal (like a new video game) at the same time.

FDIC Insurance

The best savings accounts (for you or your child) should be FDIC insured. You can do an online search to see if your bank is covered.

Children’s Savings Accounts vs. Custodial Accounts

It’s important to note that there’s a difference between a joint children’s savings account that you co-open with your child and so-called custodial accounts. Custodial accounts are investment plans that focus on saving for your child’s education. Examples of such accounts include 529 plans, UTMA, and UGMAs.

With custodial accounts, your child owns the assets held in the account. However, they cannot access said assets until the age of 18 or 21 (depending on the account). Custodial accounts may also feature tax benefits. Yet the funds in these accounts could also impact your child’s ability to access federal financial aid for college.

Motivating Your Child to Save

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Once you choose the right savings account for your child, you can start using it as a tool to teach your son or daughter important financial lessons. Here are five suggestions that may help you get started.

Choose a Goal

Let your child choose a savings goal to work towards. Depending on your son or daughter’s age, their financial objectives may vary from something small (like a new toy, fashion-related item, or technology) to a more expensive purchase.

Help Your Child Earn Money

Consider giving your child opportunities to get or earn money through an allowance, chores, or in other ways. If your child is older, you might assist them in finding a part-time job, setting up an online business, or making money through an age-appropriate side hustle.

Provide Savings Incentives

One of the primary aims of a savings account is to teach your child the benefits of delayed gratification and putting money away for the future. So, make a point to show your son or daughter the interest they are earning on the money they save. If your budget allows, you might consider matching a portion of your child’s savings to keep your child motivated to reach their savings goals.

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Add Responsibility

A young child might not understand how to review their bank statement or reconcile their bank account. But they may be ready to understand how to make cash deposits into their account and track their savings balance as it fluctuates. As your child grows older, you can add on additional responsibilities, so they learn how to manage a bank account, plan and budget their spending, and more.

Next Steps

Teaching your child smart financial habits at a young age can go a long way toward setting them up for future success. And a kid-friendly savings account can be an effective tool to help you impart the foundational money lessons your son or daughter needs to learn.