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What is the Best Children’s Savings Account?

Written by Banks Editorial Team

Updated September 18, 2023​

5 min. read​

children’s savings account

A children’s savings account is an excellent contribution to your child’s future — both teaching them how to responsibly save their money and preparing them for adulthood and its many expenses. In many cases, these funds help immensely in the future when high school graduation is around the corner, and college costs are looming. In fact, Forbes reports that student loan debt in 2020 has hit about 1.56 trillion dollars. While your children won’t owe such a substantial amount, they’re likely to accrue a significant amount of debt that it would be beneficial to prepare for now rather than later.

When determining where you want to put your child’s money, it’s important to understand what to look for and what to expect with the savings account. Not only is it an excellent way to build savings for your little ones to secure their future, but it is also a great way to stash birthday money, extra cash, and chore money to accrue interest and keep safe. 

What Is a Children’s Savings Account?

A children’s savings account is a type of savings account created by an adult for the sole purpose of contributing and safe-keeping money that is intended to be handed down to a child when they’re of age (typically 18 years old). While it was once common for parents to stack money under mattresses and in drawers for safe-keeping, it is becoming more evident that there are too many risks at stake with that method. On the other hand, it isn’t your only option since an appropriate children’s savings account program can fit every family’s needs. 

Forbes explains that making the switch from traditional hiding spots in the house to children having a savings account of their own can help your child feel more grown-up. You may even inspire them to learn more about finance and develop better financial habits at a young age.”

Children’s Savings Accounts Types

An ideal option would be to open a regular children’s savings account so your child has their name on it and can manage it (with your control) in ways that will teach them how finances work and how to save. On the other hand, there are other options to consider if there is any reason you cannot find a financial institution that will open an account in your child’s name.

Share Your Adult Savings Account

This option is an absolute last resort because it can have many potential problems. Not only does it exclude any beneficial perks many kid-specific savings accounts have, but it can also lead to more issues than it’s worth. 

The Law Office of Heather Norton warns adults that the risks of sharing your adult savings account with your child include:

  • You owe the IRS gift taxes.
  • Their creditors can reach your assets.
  • Your grandchildren could lose college aid.
  • Your money could go to your child’s heirs.
  • A legal judgment could empty your account.
  • Your child could lose eligibility for public benefits and more.

Custodial Savings Account 

While custodial savings accounts can be great because they typically don’t have income limits, contribution limits, or withdrawal penalties, they do have some significant setbacks to consider. 

Some drawbacks include:

  • You’re required to pay taxes on any yields.
  • It can disqualify a student from receiving financial aid for attending college.

The Best Children Savings Account: Features Overview

When you compare children’s savings accounts, the features are an important consideration in the accounts you’re reviewing. The idea is to find the kind of account that fits you and your child’s needs the best with less hassle and cost. So, the more you familiarize yourself with the best features to look out for, the better prepared you will be, and the more beneficial the results will be for you and your child. 

According to the Top 10 Children’s Savings Accounts of 2020, these are some important features to look out for in your search.

Learning Tools On Banking Websites

An excellent savings account feature is educational content that children can easily access and use. Children entering adulthood with a better understanding of financial management are more prepared for financial success. Some educational content on banking websites can share information adults may not think to teach about, and in a way, kids will have fun while learning! It is also important to note the benefits of finding educational content for adults to teach children about banking. Some information is better received with a little in-person guidance. 

Safety First Content 

Another great consideration is content on safely surfing the internet. For instance, some banking options are teaming with the FBI to direct you and your children to the Safe Online Surfing Internet Challenge. They describe it as “a free, educational program for children that teaches cyber safety [where] participating students “surf” their way through a variety of Internet safety challenges at each grade level (3rd grade to 8th grade), with characters guiding them through the games.” It’s a fun way to keep children safe on the internet now that a lot of banking has moved over to apps and online activity. 

Kid-Friendly Mobile Banking App

Kids need to learn the basics of saving and managing money on websites, but first-hand experience can be another great feature to find. In many cases, you’ll find that the best savings account for children’s education incorporates parental controls while giving kids access to tools such as access to automatic savings plans and goal trackers that can be set up by children as savings goals. As Finextra so eloquently says, “Give a man a fish, and he’ll eat for a day, give a child a user-friendly-savings-encouraging-card-app-account-overseen-by-parents, and they will bank well for life.”

No Monthly Service Fees and Little (To No) Minimum Opening Balance

A great feature to look out for is the minimum amount of money you’re expected to contribute when opening your child’s savings account. Some people may have a large amount of money to contribute immediately, but in some cases, parents/guardians don’t have it right now and shouldn’t wait until they do. Children at an appropriate age to learn about banking shouldn’t have to wait and don’t have to! Fortunately, there are excellent options with no monthly (or minimum daily balance) service fees and no minimum balance to open (or a tiny amount).

More Money Contribution Opportunities

It’s great that you and your friends/family are contributing to your children’s future, but wouldn’t it be great if there were other savings boosts as well? Consider children’s savings accounts with ‘earned interest’ building up over the years. In some cases, banks are even offering one-time birthday bonuses deposited into your child’s account every year.

An ATM Card for Depositing, Not Spending

The easier it is to deposit money, the more encouraged you and your children would be to contribute regularly. It’s also important that it can’t be used for spending because it can also be just as convenient to pay with. 

How to Open a Children’s Saving Account

Opening a children’s savings account begins with a little research on the perks and features offered by banks in your local area. Not every savings account plan offers all the features above, so the trick is to find the ones that offer the features you find the most beneficial and compare your favorite options to see which suits you and your child best. 

What you need to bring with you to open a kids’ savings account:

  • Your signature since children are not legally allowed to sign documents.
  • Present the child’s social security card or birth certificate.
  • You, of course: if your child is old enough to show a driver’s license, they’ll need to bring it with them. Otherwise, your credentials are required. 

Aside from the above, the Consumer Financial Protection Bureau suggests doing these things before (and during) opening a savings account for your child:

  1. Pay attention to your child’s money milestones.
  2. Talk about money choices because “it’s not too early—or too late!”
  3. Adapt the conversation to where your child is.
  4. Read together when you can by following a “Money as You Grow Bookshelf to help you weave in money skills in a way they’ll understand.

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