If you’re looking at opening a savings account for your kid, you might be facing many questions such as what type of account to get, what options are available, and which account might be the best for them in the long run. Don’t worry, all these questions are very valid.
The good news is that there are many different accounts available, each with its own pros and cons.
In this article, we’ll be looking at everything there is to know about kids’ savings account, including why you should open one, what options are available, what to think about before committing to one financial institution, and looking at the best savings account for kids on offer today.
10 Best Savings Accounts For Kids
Here are the top 10 best savings accounts for kids:
- Alliant Credit Union: Kids Savings Account
- Bank of America: Minor Savings
- BECU (Boeing Employee Credit Union): Early Saver
- Capital One: Kids Savings
- Chase Bank: Savings
- First Internet Bank: Tomorrow’s Tycoons
- Garden Savings Federal Credit Union: Kids Club Savings
- PNC Bank: ‘S’ is for Savings
- TD Bank: TD Youth Account
- Wells Fargo: Kids Savings Account
1. Alliant Credit Union: Kids Savings Account
The account is free, meaning there are no monthly maintenance fees to pay as long as you opt for electronic statements instead of paper ones. There is a $5.00 minimum opening deposit, but the credit union will cover this for you.
The account can be opened as a joint account with a parent, grandparent, or legal guardian. It should be noted that the adult joint owner must be an Alliant Credit Union member. The account offers an APY of 0.55%, which makes this a high-yield savings account for kids.
2. Bank of America: Minor Savings
Bank of America’s Minor Savings Account has no monthly fee for as long as the account holder is under 18 years old. Once the kid reaches 18, the account is converted into a Bank of America Savings Account, where fees might apply.
The account has a minimum opening deposit of $25 but no minimum daily balance. The account is insured by the FDIC and includes the ability to make automatic transfers. There is a limit of 6 transfers and withdrawals per statement cycle. Going over and above this limit will see you incur a charge of $1.00 per instance. Other account features include access to online and mobile banking and alerts.
Bank of America also offers Custodial (UTMA) Savings accounts. These have a $100 minimum opening deposit and a minimum daily balance requirement of $500. Failure to meet the minimum balance requirement will see the account charged an $8.00 monthly maintenance fee.
3. BECU (Boeing Employee Credit Union): Early Saver
BECU’s Early Saver account offers an APY of 2.02% on balances of up to $500, while anything above that earns a much lower rate of 0.02%. There are no monthly service fees and no minimum balance requirement to open the account.
The adult joint owner needs to be a BECU member, but the credit union gives you the option to apply for your own membership at the same time as opening the kids’ account. Kids over 13 years of age get access to online banking and mobile banking for free.
You cannot apply for the account online. There’s a form that you can download on their website, which needs to be filled in and mailed to the credit union or dropped off at one of their locations. If you don’t own a printer, you can also pick up a form from a BECU location.
4. Capital One: Kids Savings
Capital One’s Kids Savings Account offers an APY of 0.30% on all balances, providing a consistent rate to help the kid grow their money. There are no monthly maintenance fees and no minimum balance requirements either. The account doesn’t have a minimum initial deposit.
You can set up different savings account for different savings goals. There is a limit of 6 withdrawals per month, including internal transfers. While on the subject of transfers, the adult joint owner will need to log in with their credentials to move money about, providing an extra security layer.
Once the kid turns 18, the account is automatically converted into a Capital One 360 Savings account, provided that the terms and conditions of the new account can be safely met.
5. Chase Bank: First Banking
Chase’s First Banking account includes a savings account for teens to start their saving journey, with a monthly maintenance fee of $5.00. This is waived if an account owner is younger than 18.
The APY on offer stands at 0.01%. The interest is compounded and paid out monthly using the daily collected balance. Withdrawals are limited to 6 per month. Exceeding this limit incurs a charge of $5.00 per withdrawal.
Chase Bank offers many resources to help your child learn more about money, including webcasts, budgeting tools, and a feature-rich banking app.
6. First Internet Bank: Tomorrow’s Tycoons
First Internet Bank’s kid savings account has an APY 0f 0.25% and no monthly maintenance fee. There is a minimum opening deposit of $100 and no minimum balance requirements.
The account is FDIC insured and allows up to 6 transactions per month. Access to online and mobile banking is included with the account, and no ATM card is available. The account automatically converts to a free savings account when the child turns 18.
First Internet Bank also offers an education savings account that works like a CD (Certificate of Deposit). Named Coverdell Education Savings, the account is tax-advantaged and can be used for educational purposes. The interest rate varies from 0.75% for a 12-month savings plan all the way to 0.90% for a 48 or 60-month plan.
7. Garden Savings Federal Credit Union: Kids Club Savings
Garden Savings Federal Credit Union’s Kids Club Savings account is available for kids 18 and younger. It features no monthly fees and no minimum balance with a low minimum opening deposit requirement of just $5.00.
The account has an APY of 0.50% on all balances. The credit union also offers many different educational tools to help the kid learn about the importance of money.
These tools include games and other educational resources and are relevant for kids and young adults alike. The account also includes access to free online and mobile banking as well as electronic statements.
8. PNC Bank: ‘S’ is for Savings
PNC Bank’s ‘S’ is for Savings account offers an interactive banking experience through its online banking website that includes many different tips from Sesame Street.
Here you’ll find several activities that you can do together with your child to teach them the basics of money.
There is a minimum deposit requirement of $25 to open the account. The maintenance fee is set at $5.00 per month, but this can be avoided if they’re under 18.
Other ways to avoid the bank fee include maintaining a monthly balance of $300 on average or making a minimum of 1 Auto Savings transfer of $25 or more.
9. TD Bank: TD Youth Account
TD Bank’s TD Youth Account is available for kids under 18 and features no monthly fee and no limits on transactions. Interest, set at an APY of 0.01%, is earned on any balance over $1.00.
Parents can set up a Simply Save Program or a Pre-Authorized Transfer from their account to the kids’ account, helping them grow their savings.
The account also includes access to the TD app with features such as TD MySpenf, which helps you keep track of your account.
10. Wells Fargo: Kids Savings Account
Wells Fargo kids savings account can be set up in one of three ways. The first option is joint ownership, giving the kid access to the account while the adult joint account holder monitors the activity.
The account includes access to Well Fargo Online once the child reaches 18 years of age and an optional ATM card.
Another option is Minor by. This gives the parent exclusive rights over the account, with the child gaining access on their 18th birthday. The final option is the UTMA/UGMA option, which follows all prerequisites of the law.
The account also includes several benefits, such as online bank statements and online transfers. The account automatically converts to a Way2Save Savings account once the child turns 18.
Why Open Savings Accounts for Kids?
Opening a savings account for a kid can help them get started on the right foot towards a healthy and bright financial future.
Saving money is not easy, with 21% of Americans not savings anything at all.
Yet, saving money remains important. Many experts agree that we should be saving anything between 10 to 20% of our income just for retirement.
Include saving for an emergency fund, a down payment, or a family holiday, and you’ll quickly realize why having a savings account early on is important.
Plus, the sooner you start investing for your child, the more time you have to earn compound interest, so your money will go further.
What Options Are There When It Comes To Accounts For Kids?
Legally, kids can’t have a bank account on their own, with one or two exceptions. But kids are allowed to have a bank account with a parent or legal guardian.
There are two main types of kids’ bank accounts available, joint bank accounts and custodial bank accounts.
These two accounts have major differences, so let’s look into what each of them does and doesn’t. This will help you decide which type could work best for you.
Joint Bank Accounts
Joint bank accounts are held jointly between two people. While many think they’re reserved for married couples only – in reality, any two people can open one.
Many banks and credit unions offer kids accounts with joint parent ownership.
In most cases, the parent is given several controls over the account and how money is spent, including setting up limits and receiving alerts, but this is subject to change from one bank to the next.
Custodial Bank Accounts
The UGMA (Uniform Gifts to Minors Act) and the UTMA (Uniform Transfer to Minors Act), a custodial account may be established for a kid (minor) by a parent or legal guardian. This can be done without having to set up a trust fund, making it that much easier.
Unlike joint bank accounts, ht kid cannot access the money. The money is managed by the parent or legal guardian, who acts as the account’s fiduciary.
Even so, the account must be managed in the kid’s best interests while allowing for certain fair and reasonable disbursements.
What To Look For In A Kids Savings Account
While many savers have different goals and financial expectations when it comes to savings accounts, there are a few things that go a long way in making a savings account one of the best. In this next section, we will look at what makes a savings account one of the best.
- APY Rate: Many savings account offer an APY (Annual Percentage Yield) rate, which represents the percentage of interest that you’ll earn on money in your account. This rate can vary a lot from 0.01% at the low end to rates that hover around the 0.50% mark. The higher the rate, the more money you’ll earn as interest.
- Fees: Bank fees such as monthly maintenance fees can put a serious dent in your savings. Finding an account with little to no fees can help you make sure that the money your kid saves stays in their account, where it will earn interest, rather than going to the bank.
- Education: When it comes to kids’ savings accounts, many banks and credit unions offer many financial education tools to help them learn about money and financial responsibility. This can be an important aspect of having a savings account, helping them learn the value of money and how to take care of it.
- Insurance: While it’s unlikely that a bank or credit union will go bankrupt overnight, it’s not unheard of either. Having an account insured by the FDIC (Federal Deposit Insurance Corporation) if it’s a bank or by the NCUA (National Credit Union Administration) if it’s a credit union can help you put your mind at rest. In most cases, both the FDIC as well as the NCUA insure accounts up to $250,000.
- Ease of use: Easy to use features such as the ability to set up recurring transfers, monitoring bank account activity, and ensuring that the kid is safe and on their way to reaching their financial goals are important. Not only can this provide you with peace of mind and ultimately ensures the success of the savings account.
Savings Accounts for Kids FAQs
What is a kids savings account?
Kids savings accounts are savings accounts that can be opened at most traditional banks or credit unions on behalf of a child.
These accounts help teach kids how to manage their money and establish healthy savings habits. Kids savings accounts typically come with waived fees and education features.
How much access does the child have to a kids savings account?
Banks will require someone 18 years or older to sign on as a joint account holder. But this only gives you joint control of the account. Your child will also have full access to the account, meaning they could potentially drain the account or overdraft by overspending.
Is a savings account better than a checking account for kids?
Checking accounts and savings accounts are meant for very different things, and as such, one is not better than the other. The important thing here is to understand what purpose the account will serve.
If it’s to save money, a savings account is definitely the best way to go. On the other hand, if you’re looking for an account to manage the day-to-day expenses, a checking account might be a more suitable choice.
Finding The Best Savings Account For Your Kid
Opening a savings account for your kid is as important as teaching them about money management. Getting them a savings account, with or without an automatic savings plan, can really contribute to their financial success.
With many Americans finding it difficult to save money, starting savings habits early on can prove to be a key decision that will help them manage their finances better. This can really help when they finally get that debit card to play with, especially when they get their first credit card.
With so many different children’s savings accounts available, choosing the best savings account option can be difficult. The important thing here is not to rush and to take the time to understand what’s important to you and your child.
For some, it might be a high-interest rate; for others, the ability to make an unlimited number of transfers or the ease with which the account can be managed.
You may want to open it with an online bank that’s super easy to use or want to manage everything through an easy mobile banking app. Either way, the important thing is to understand what’s most important to you and then get the account that does just that.
While most banks offer joint accounts, you will also find other types, like UTMA/UGMA accounts. There’s no one best type either since different people will have different requirements depending on their situation and financial means.
Since these types of accounts are meant to last for years, make sure you not only think about the now but also what you might want from the account in the future. The sooner you start investing for your child, the more time you have to earn compound interest, so your money will go even further.