Kids savings account

What It Means

A kids savings accountSavings accountA bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions. See more is a savings account at a bank or credit union that holds money for a child, like birthday gifts or allowanceAllowanceA set amount of money a child gets on a regular schedule to manage, often with an agreement about what it has to cover. See more they choose to save. Because many states don't let minors open accounts alone, it's usually set up as a joint accountJoint accountA bank or credit union account owned by two or more people, each of whom can usually deposit, withdraw, move money or close it. See more with a parent or as a custodial accountCustodial accountAn account an adult manages for a minor, usually under state UGMA or UTMA law, where the money legally belongs to the child from the day it goes in. See more, and many banks sell youth savings accounts built for this. The FDIC notes these accounts carry the same federal consumer protections as any other.

How People Say It

• "We opened her first savings account with her birthday money."
• "He likes watching the interest show up each month."
• "The bank wants a parent on the account until she's 18."

The Breakdown

Worked example. Nora is 7. She moves $5 of her allowance into savings each week, and her grandparents send $50 for her birthday and $50 at the holidays, which go straight in.

After three years of the same habit she'd have deposited $1,080, plus whatever interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more the account pays at the APYAPYA yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules. See more in its disclosure.

What the result means. At this size the habit matters far more than the rate, and a statement showing money going in and interest coming out gives a child something concrete to look at. If a bank's youth account charges a monthly fee, compare it with the interest a small balance would earn.

Questions to ask the bank

• Does the child need a parent or guardian on the account, and until what age?
• Is it a joint account or a custodial account?
• What's the APY, and is there a monthly fee or minimum balance?
• Can the child see the balance or make deposits themselves?

Good to Know

Account ownership matters. Both people own a joint account, while the money in a custodial account under UGMAUGMA accountA custodial account under a state's Uniform Gifts to Minors Act, holding cash, securities or insurance policies for a child until they come of age. See more or UTMAUTMA accountA custodial account set up under a state's Uniform Transfers to Minors Act, which can hold almost any kind of asset for a child, including real estate. See more legally belongs to the child and passes to them at an age set by state law. Interest a child earns counts as unearned income; for 2025, IRS Topic 553 draws the kiddie tax line at $2,700 a year, well above the $200 that $5,000 would earn at an example 4% APY. The FDIC's "Your Child's Financial Building Blocks" has more on building money skills by age.

Related Terms and Categories

• Savings account

  A bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions.

• Financial literacy for kids

  The money skills, habits and knowledge children build over time, from waiting for something they want to budgeting, saving and weighing choices.

• Spend save give jars

  A way of teaching kids about money by splitting each allowance or gift into three jars: one to spend, one to save and one to give away.

• Custodial account

  An account an adult manages for a minor, usually under state UGMA or UTMA law, where the money legally belongs to the child from the day it goes in.

• Chore money

  Money a child earns for jobs around the house, often paid for extra work beyond the chores everyone in the family is expected to do.

Saving and investing basics