While saving money is one of the most important activities that can contribute to a healthy financial future, it remains one of the most difficult.
Starting early with a baby savings account can help them understand the importance of having a savings plan and teach them money management skills once they are old enough.
In this article, we’ll look at the importance of opening a savings account for a baby.
We’ll cover what to look out for and to expect – as well as some of the best savings accounts for babies available today.
Why Open A Savings Account For A Baby?
Whether you would like to start early with planning for college savings or have some other savings goals for a growing baby, opening a savings account is a great idea.
It can help them learn the importance of money and managing it and can contribute to a better credit score when they grow up.
While there are other may accounts, like an MMA (Money Market Account) or a custodial IRA (Individual Retirement Account), savings accounts generally offer more flexibility.
Another option to consider might be a CD with CD rates usually higher than savings rates. Do keep in mind that you can’t make regular deposits with a CD (making the savings option a more appealing choice).
Types of Savings Accounts For Babies
When it comes to opening an account for minors, you will mainly have two account options (though not all banks offer both).
Because of this, you might want to choose the type of account first since there are apparent differences between the two.
Custodial Accounts (UGMA or UTMA)
Custodial accounts come in two flavors – UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act).
They both work as custodial accounts, which means that while the parent or custodian retains control, the funds are still in the minor’s name.
You’ll be able to choose between UGMA or UTMA depending on the state in which you live; however, they both work the same.
Custodial accounts can be held until the minor reaches maturity age 18 or 21, again depending on the state.
Custodial accounts do not have a tax benefit, unlike a 529 plan but offer more flexibility.
You can spend money in this type of account for the child’s benefit – be it clothes, tuition, books, or anything else the child might need. The custodian can also take out disbursements within reason.
Joint Accounts
Joint accounts work very differently from custodial accounts.
That’s because you and the minor are listed as co-owners of the account, just like a couple or business partners might have a joint account.
In most cases, the parent will be afforded several different controls over the account. Still, these can change from one bank or credit union to the next.
Typically, however, the parent or custodian will set up spending limits and receive alerts whenever money is withdrawn from the account.
What To Look For In a Baby Savings Account
Just like grown-up savings accounts, savings accounts for babies come with different features and perks.
Understanding what these features and perks are can help you understand which account is most suitable for you and the child.
Do keep in mind that there is no one best account. You will most likely have to give up some things to gain others, so understanding what’s important to you will go a long way in helping you pick the right account for you.
Even so, here are some important things that you should consider when picking a savings account for a child.
Fees
Most bank accounts come with account fees, with the monthly maintenance fee being one of the more important ones.
While not all banks charge this fee, in most cases, you’ll be able to avoid the monthly account fee by meeting balance requirements or making regular deposits.
You should also check if there’s an initial deposit requirement to open the account and that you can meet the minimum balance requirements to avoid paying fees.
Interest Rate
The interest rate – usually expressed as an APY (Annual Percentage Yield) tells you how much money will the money in the account earn you.
Considering that the money is going to be collecting interest for 18 years (or thereabouts), even the slightest increase in interest rate can end up making a big difference.
APY is a special type of interest, also known as compound interest, which allows interest earned to earn interest for you.
Because of this, you’ll want to choose an account that has frequent compounding terms, with the shortest term available being just one day.
Here, online banks tend to offer better rates since they have much fewer overheads than traditional brick and mortar banks.
Member FDIC or NCUA
Having insurance on your account is a great idea. While the bank or credit union is unlikely to fail, it does happen.
Being protected can help you ensure that you don’t lose your money.
Banks will ensure depositors through the FDIC (Federal Deposit Insurance corporation) while credit unions insure depositors through NCUA (National Credit Union Administration).
n most cases, accounts are insured up to $250,000, but some restrictions do apply.
Baby Savings Account Features
While babies do not typically care about account features and generally do not need them, babies like to grow up fast.
If you’re getting an account for the long term, making sure it comes with features that will be useful down the line has many advantages.
Not all features are important to everyone, which is why not all accounts come with all features. Take the time to understand what’s important to you to choose the account that comes with the right feature set for you.
We will now look at some of the most common and useful features available with minor accounts.
Online and Mobile Access
While many take internet and mobile banking access as a given, making sure that this comes in a user-friendly package is important. A good mobile banking app will also give your kid a better understanding of how bank accounts work without having to understand the more advanced features.
Educational Resources
Many banks and credit unions that offer minors accounts also include several educational resources that can help the little account holder understand money. Regardless of the path they choose in life, a good and true understanding of finance will surely help them succeed.
Parental Control
Parental controls can help you make sure that your child does not learn through expensive mistakes. Here you will typically find limit-setting features and alerts whenever a withdrawal takes place, be it from a linked debit card or bank transfer.
Budgeting Features
When it comes to financial goals, budgeting skills are one of the essential skills you need. Many accounts now come with several budgeting features to help kids (and grown-ups) stay within their spending limits.
These apps can help you develop a healthier approach to personal finance, which, let’s face it, can be pretty tricky to manage.
Best Savings Accounts For A Baby
While there are many options to chose from, here are our top 4 picks for the best baby savings accounts:
Alliant Credit Union 
Alliant Credit Union offers a Kids Savings Account that a kid can open with their parents, grandparents, or legal guardians. There is an initial deposit requirement of $5.00, which the credit union will generously pay for you.
There are no monthly fees as long as you opt for eStatements. Using this option, you’ll save $1.00 per statement and some trees. The APY rate on offer is set at 0.55%, which is applicable once the account reaches a balance of at least $100.
The account can be linked to your savings or checking account to make it easier to transfer funds. You can also set up supplemental accounts to help the child save for something special, giving them that extra boost of motivation.
Once the child turns 13, they will become eligible for a Teen Checking account, giving them, and you, greater control over how money is saved and spent.
Learn More:
Capital One 
Capital One’s Kids Savings Account comes with no opening deposit requirements and no monthly fees.
The APY is currently set at 0.30%, which is still a reasonable rate even though it is not the highest. You can either open the account in your name or jointly with your kid.
The Kids Savings Account can also be linked to your account, facilitating the transfer of funds; however, there is a limit of 6 transfers per month.
You can also create separate accounts according to their goals, helping them better understand how close they are to reaching their targets.
You can also login to the account using your own username and password to transfer money, set up automatic savings, and manage the account’s details.
Learn More:
PNC Bank 
PNC’s ‘S’ is for Savings is a savings account for kids that comes with one feature you’d be hard-pressed to find anywhere else – Sesame Street.
The muppets make an appearance with activities you can do together with your child to teach your kid important money concepts.
There is a $25.00 minimum opening deposit requirement. The monthly service charge is waived as long as the account holder is under 18 years old.
You can also avoid the fee by maintaining an average balance of $300 each month or making an automatic transfer of at least $24 from an eligible account each month.
Other features of this account include auto savings, interest on balances of $1.00 or more, and unlimited deposits.
Learn More:
Wells Fargo 
Wells Fargo offers a savings account for children called Way2Save. You can set up the account in 1 of 3 different ways, including a Joint ownership account, a Minor by account, or a UTMA/ UGMA account.
There is a $25.00 minimum opening deposit requirement. No monthly fees are charged for as long as the primary account owner is under 24 years of age. However, the child needs to be at least 13 years old before accessing online banking.
Account features include the ability to transfer money from other Wells Fargo accounts and a savings matching program to motivate your child to save even more money.
Learn More:
Savings Account For a Baby FAQs
Can you open a savings account for a baby?
Many banks and financial institutions offer special accounts for babies and young children. Make sure you check with the bank what kind of identification is required. It’s often the child’s birth certificate and the parent’s SSN (Social Security Number).
What is the best savings account for a baby?
The best savings account for a baby is the one that meets your goals. If you are looking at growing savings, an online savings account will probably be your best bet.
On the other hand, if you’re looking for a complete package with an emphasis on education, a bank account that offers such tools is going to help you get there faster.
It’s also worth thinking about the future – like whether you would like your teen to have an ATM card to withdraw money.
Can you set up a bank account for a baby?
You can generally set up either a custodial account or a joint account – depending on what you need. These accounts tend to come with specific tools to help you reach your savings goals faster while missing some features such as credit cards and overdrafts.
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