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Savings Account for Kids: Best Accounts, Custodial vs Joint, and How to Start
Updated 30 March 2026
The right kids savings account teaches your child about money while earning real interest. At 3.10% APY, a $50 monthly contribution started at birth grows to over $12,000 by age 18. This guide covers the top accounts, explains custodial vs joint structures, breaks down the kiddie tax rules, and includes a growth calculator so you can project exactly what your child's savings will look like.
Kids Savings Growth Calculator
Project how much your child's savings will grow with compound interest. Adjust the sliders to model different scenarios.
Projected Balance at 18
$12,659
With compound interest
Total Contributions
$9,500
Your money in
Interest Earned
$3,159
Free money from APY
Piggy Bank (No Interest)
$9,500
Without a savings account
Compound interest advantage: By putting money in a savings account instead of a piggy bank, your child earns an extra $3,159 by age 18. That is a 33.3% return on total contributions.
Top 5 Savings Accounts for Kids in 2026
We ranked these accounts based on APY, fees, minimum balance requirements, and features that help kids learn about money. All accounts listed are FDIC or NCUA insured up to $250,000.
Alliant Credit Union Kids Savings
Alliant is a federally insured credit union open to anyone who joins via a $5 donation to Foster Care to Success. The Kids Savings account offers one of the highest rates available with no balance cap. Children can transition to a teen checking account at age 13, building a long-term banking relationship. No monthly fees and a low $5 minimum to open make this accessible for any family. Alliant also offers a mobile app where parents can manage the account and show children their balance growth.
Minimum: $5 / No monthly fees / NCUA insured
3.10%
APY
Capital One Kids Savings
Capital One offers a dedicated kids savings account with no minimum deposit and no monthly fees. The parent manages the account through the Capital One app with full parental controls. The app includes goal tracking features that let kids set savings targets and watch their progress visually. Automatic savings transfers help build the habit without manual effort. The rate is lower than Alliant but the app experience is among the best for engaging children with their money.
Minimum: $0 / No monthly fees / FDIC insured
2.50%
APY
Chase First Banking
Chase First Banking is designed for kids ages 6 to 17. It includes a debit card with parental spending controls, the ability to set up chores and allowance payments in the Chase app, and real-time spending alerts. The account links to a parent's Chase checking account. While the savings interest rate is minimal compared to online-only banks, the value here is the complete banking experience. Kids learn to manage a debit card, track spending, and receive allowance electronically. No monthly fees when linked to a qualifying Chase account.
Ages 6-17 / Debit card included / No monthly fees with qualifying Chase account / FDIC insured
0.01%
APY
Greenlight
Greenlight is a comprehensive financial platform for families. The savings feature offers up to 5% APY that parents set and fund themselves as a teaching tool (not a bank-paid rate on the standard plan), plus a debit card, investing for kids, chore management, and financial literacy lessons built into the app. Greenlight Infinity ($14.98/month) includes 5% savings rate paid by Greenlight, identity theft protection, and investing. The standard plan ($5.99/month) provides the core debit card and savings features. Best for families who want an all-in-one financial education platform.
$5.99 to $14.98/month / Savings + debit + investing / FDIC insured through partner bank
Up to 5%
Parent-funded APY
Copper Banking
Copper is a teen-focused banking app for ages 6 and up. It includes a debit card, savings goals, and direct deposit capabilities. Unlike Greenlight, Copper has no monthly fee for the basic plan, which makes it a budget-friendly alternative. Parents get spending notifications, transaction controls, and the ability to instantly transfer money to their child's account. The savings rate is modest, but the zero-fee structure and clean app design make it a strong choice for families looking for a simple, no-cost introduction to banking for kids.
No monthly fee (basic plan) / Ages 6+ / Debit card included / FDIC insured through partner bank
0.51%
APY
On a $1,000 balance, the difference between 0.01% APY (Chase) and 3.10% APY (Alliant) is $31 per year. On a $5,000 balance, that gap widens to $155 per year. For families focused on maximizing interest earned, Alliant is the clear winner. For families who prioritize the banking experience and financial education features, Chase First Banking or Greenlight deliver more value despite lower rates. Many parents open two accounts: a high-rate account at Alliant or Capital One for the bulk of savings, and a debit card account at Chase or Copper for day-to-day learning.
Custodial Accounts Explained: UTMA and UGMA
A custodial account is a financial account held by an adult (the custodian) on behalf of a minor (the beneficiary). The money in a custodial account legally belongs to the child from the moment it is deposited. This is an irrevocable gift. Once you put money into a UTMA or UGMA account, you cannot take it back. The custodian manages the account and makes investment decisions until the child reaches the age of majority, at which point the child takes full control.
UGMA (Uniform Gifts to Minors Act) accounts can hold financial assets like cash, stocks, bonds, and mutual funds. UTMA (Uniform Transfers to Minors Act) accounts can hold all of those plus real estate, patents, and other property types. In practice, most families use custodial accounts for cash savings and investment portfolios. Both account types are available at most brokerages and banks.
The custodian has a fiduciary duty to manage the account in the child's best interest. Withdrawals must benefit the minor. Using custodial account funds for expenses that are already a parent's legal obligation (food, shelter, clothing) is generally not permitted. The account is intended for extras: education costs, a car, summer camp, or a head start on adult financial life.
For a detailed comparison of custodial vs joint accounts, including when each type makes sense for your family, see our custodial vs joint guide. For a deeper look at UTMA/UGMA rules, state-by-state age of majority, and tax implications, see our UTMA/UGMA guide.
How to Open a Savings Account for Your Child
Opening a kids savings account takes 10 to 15 minutes online or 20 to 30 minutes in a branch. The process varies slightly by bank and account type, but here is what you will need in every case.
Required Documents
- Parent's government-issued photo ID (driver's license or passport)
- Parent's Social Security number
- Child's Social Security number
- Child's date of birth
- Proof of address (utility bill, bank statement, or lease)
Steps to Open
- 1. Choose your account type (custodial or joint)
- 2. Select a bank or credit union
- 3. Complete the online or in-branch application
- 4. Fund the account with an initial deposit
- 5. Set up automatic monthly transfers
- 6. Add your child to the account (for joint accounts)
Most online banks (Alliant, Capital One, Ally) handle the entire process digitally. You link your existing checking account, verify your identity, and the kids savings account is open within minutes. In-branch banks like Chase require a visit but offer the advantage of face-to-face setup and a physical debit card for accounts that include one.
One tip: set up automatic monthly transfers on the day you open the account. Parents who automate contributions save an average of 3 to 4 times more than those who deposit manually. Even $25 per month on autopilot builds significant savings over a decade.
Teaching Kids About Money at Different Ages
A savings account is only as valuable as the financial education that surrounds it. Research from the University of Cambridge shows that money habits are largely formed by age 7. Here is what to teach at each stage.
Ages 3 to 6: Basics
Use a clear jar so kids can physically see money accumulate. Teach that things cost money and that you choose between options. Let them hand cash to the cashier at the store. Introduce the concept of saving for something they want rather than getting it immediately.
Ages 7 to 10: Earning and Goals
Connect earning to effort through age-appropriate chores with a fixed allowance. Set savings goals with a visual tracker (a thermometer chart taped to the fridge works well). Open the savings account and visit the bank together for deposits. Show them the account balance online and explain that the bank pays interest for holding their money.
Ages 11 to 14: Budgeting and Banking
Give a monthly budget for discretionary spending and let them manage it. Introduce a debit card (Copper or Chase First Banking). Show them compound interest by comparing their account balance with and without interest over time. Discuss the difference between needs and wants. Introduce the concept of opportunity cost.
Ages 15 to 17: Real-World Finance
When they get a part-time job, walk through the pay stub and explain gross vs net pay, Social Security, and income tax withholding. Consider a custodial Roth IRA if they have earned income. Discuss college costs, student loans, and the true price of different education paths. Add them as an authorized user on a credit card to start building credit history.
Kiddie Tax Rules: How Your Child's Savings Are Taxed
The kiddie tax applies to unearned income (interest, dividends, capital gains) held in a child's name. For 2026, the thresholds work as follows:
First $1,250
Tax-Free
Standard deduction for dependents
Next $1,250
Child's Rate
Typically 10% federal
Above $2,500
Parent's Rate
Taxed at parent's marginal rate
In practical terms, the kiddie tax is irrelevant for most kids savings accounts. At 3.10% APY, your child would need approximately $40,000 in the account before earning enough interest ($1,250) to reach the first tax threshold. At 4.00% APY, that threshold is approximately $31,250. Very few children have savings account balances that high. The kiddie tax becomes more relevant for custodial investment accounts where capital gains and dividends can be larger.
The kiddie tax applies to children under age 19, or under age 24 if they are full-time students. Once the child reaches the applicable age, all unearned income is taxed at the child's own rate regardless of amount. If your child's unearned income exceeds $2,500, you may need to file Form 8615 with their tax return, or you can elect to include the child's income on the parent's return using Form 8814.
Joint savings accounts avoid the kiddie tax entirely because the account is in the parent's name. All interest is reported on the parent's tax return. This is one reason some financial advisors recommend joint accounts over custodial accounts for smaller savings amounts.
Impact on College Financial Aid (FAFSA)
Account type directly affects how much financial aid your child qualifies for. The FAFSA formula treats student assets and parent assets very differently.
| Account Type | FAFSA Classification | Assessment Rate | $10K Account Impact/Year |
|---|---|---|---|
| Custodial (UTMA/UGMA) | Student asset | 20% | -$2,000 |
| Joint Savings | Parent asset | 5.64% | -$564 |
| 529 Plan (parent-owned) | Parent asset | 5.64% | -$564 |
| Roth IRA (child's) | Not reported | 0% | $0 |
Over four years of college, a $20,000 custodial account costs approximately $16,000 in reduced financial aid eligibility (20% per year times 4 years). The same $20,000 in a parent-owned 529 costs approximately $4,512 in reduced aid. That is an $11,488 difference in financial aid eligibility based solely on which account type you chose. For families who expect to qualify for need-based aid, this distinction is worth thousands of dollars.
Frequently Asked Questions
What is the best savings account for a child under 5?
For children under 5, Alliant Credit Union Kids Savings (3.10% APY, $5 minimum) and Capital One Kids Savings (2.50% APY, no minimum) are the strongest options. Both are FDIC or NCUA insured and have no monthly fees. At this age, the account type matters more than the rate. A custodial account (UTMA/UGMA) is best for gifts from grandparents since the money legally belongs to the child. A joint savings account is better for teaching money habits because the parent maintains full control. Many parents open both: a custodial account for family gifts and a joint account for the child to interact with as they grow older.
How much should I save for my child each month?
Even $25 to $50 per month makes a meaningful difference over 15 or more years. At $50 per month with a 3.5% APY starting at birth, your child will have approximately $12,400 by age 18, of which roughly $1,600 is interest earned. At $100 per month, the total reaches approximately $24,300 with about $2,700 in interest. The key is consistency rather than amount. Setting up automatic monthly transfers eliminates the decision fatigue that causes many parents to save inconsistently. Start with whatever fits your budget and increase the amount when your financial situation improves.
Does a kids savings account affect FAFSA financial aid?
Yes, and the impact depends entirely on account type. Custodial accounts (UTMA/UGMA) count as the student's asset and are assessed at 20% per year on FAFSA. A $10,000 custodial account reduces financial aid eligibility by approximately $2,000 per year. Joint savings accounts count as the parent's asset and are assessed at only 5.64%, meaning a $10,000 joint account reduces aid by just $564 per year. For families planning to apply for financial aid, keeping savings in a joint account or 529 plan rather than a custodial account can save thousands in aid eligibility over four years of college.
What happens to a custodial account when my child turns 18?
When the child reaches the age of majority (18 in most states, 21 in states like Mississippi, Alabama, and Nebraska), the custodial account automatically becomes the child's sole property. The child gains full legal control and can withdraw or spend the money for any purpose with no restrictions. This transfer is irrevocable. Once you contribute money to a custodial account, you cannot take it back. If you are concerned about your teenager spending college savings on a car or other large purchase, a 529 plan or joint savings account gives you more control.
Are earnings on a kids savings account taxable?
The first $1,250 of unearned income (interest, dividends) in a child's account is completely tax-free for 2026. The next $1,250 is taxed at the child's rate, which is typically 10%. Above $2,500, the kiddie tax applies and earnings are taxed at the parent's marginal rate. At 3.10% APY, a child would need roughly $40,000 in the account before reaching the first $1,250 threshold. At 4.00% APY, the threshold is about $31,250. Most kids savings accounts will never generate enough interest to trigger any tax liability. For accounts with larger balances, filing Form 8615 (Tax for Certain Children Who Have Unearned Income) may be required.
Can grandparents open a savings account for a grandchild?
Yes. Grandparents can open a custodial account (UTMA/UGMA) as the custodian for a grandchild. They can also contribute to a 529 plan. Contributions to a custodial account may qualify for the annual gift tax exclusion of $18,000 per recipient for 2026 ($36,000 for married couples gifting jointly). One important change: as of the 2024-2025 FAFSA cycle, grandparent contributions to 529 plans no longer negatively impact the student's financial aid eligibility. This makes 529 contributions from grandparents a particularly attractive option for college savings.
Should I choose a 529 plan or a savings account for my child?
Use both for different purposes. A 529 plan offers tax-free growth and tax-free withdrawals for qualified education expenses (tuition, room and board, books, computers). It is the most tax-efficient vehicle for college savings. However, 529 funds can only be used for education. A savings account is better for general-purpose saving, teaching financial literacy, and goals like a first car, emergency fund, or first apartment deposit. A 529 also has more favorable FAFSA treatment as a parent asset (5.64% assessment). The recommended approach is to use a 529 for college savings and a separate savings account for financial education and non-education goals.
What documents do I need to open a kids savings account?
To open a joint savings account for a child, you typically need: the parent's government-issued photo ID (driver's license or passport), the parent's Social Security number, the child's Social Security number, the child's date of birth, and proof of address (utility bill or bank statement). For a custodial account (UTMA/UGMA), you also need the child's Social Security number for tax reporting since the account is in the child's name. Most online banks (Ally, Capital One, Alliant) allow you to complete the entire application online in 10 to 15 minutes. Some banks require the child to be present for in-branch account opening.
Getting Started: Your Next Steps
Opening a savings account for your child is one of the simplest and most impactful financial decisions you can make as a parent. The account itself takes minutes to set up, but the financial habits and compound interest it generates will benefit your child for decades. Start by choosing your account type. If you want to maintain full control and optimize for financial aid, open a joint savings account. If the money is a gift intended for the child, open a custodial UTMA/UGMA account. If the goal is specifically college savings, open a 529 plan.
Next, pick your bank based on what matters most to your family. Alliant Credit Union (3.10% APY) is best for maximizing interest. Capital One (2.50% APY) has the best app for managing a child's account. Chase First Banking is ideal for kids who want a debit card and real banking experience. Greenlight is the most comprehensive financial education platform. Copper is the best free option with a debit card.
Finally, set up automatic monthly transfers. The single most important factor in building your child's savings is consistency. A $50 automatic monthly transfer started at birth will produce approximately $12,400 by age 18 at 3.5% APY. That same $50 per month started at age 5 produces approximately $9,200 by age 18. Starting early and automating the contributions makes the biggest difference. Use the calculator above to model your specific scenario.