Do You Need a Savings Account for Your Child?

As a parent, it can be confusing to know what the best way is to invest money received by your child, and how to protect it. A popular choice for many is to put the money into a savings account, so it can gain some interest, and so they don’t have to worry about major risks. Institutions like Chase, SoFi, and local credit unions all offer accounts specifically designed with families in mind.

A savings account is used to hold money that you don’t plan on using right away, so you won’t have daily or regular transactions like you would with a checking account. Some banks will have charges and fees if you move money too frequently out of the account, or if there are too many transactions. The Consumer Financial Protection Bureau (CFPB) recommends that families review fee schedules carefully before opening any deposit account for a minor.

You will have to evaluate the pros and cons of a savings account before placing your child’s money into an account. Here are some of the things you should be ready to talk with each financial institution about, and what to factor when making your decision.

The Money is Safe
Leaving money around the house can be problematic. Your child may lose the money, but they may be eager to spend it because they have access to it, or there is a chance that it gets misplaced or stolen. When you put the money in a savings account you know the money is safe, and you can easily monitor it online. The FDIC insures deposits up to $250,000 at member banks, meaning your child’s funds are protected even in the unlikely event of a bank failure.

Earning Interest is Easy
Savings accounts can be used as passive forms of income over time. Your child’s money will earn interest for sitting in the account untouched, and over time this can accumulate into a lot of money. You will have to look at the different types of savings accounts your financial institution offers, and look at their regulations, to see what the interest rate — expressed as the annual percentage yield, or APY — is, and what type of savings account is the best option for the amount you’re depositing. As of April 2026, Bankrate reports that the top high-yield savings accounts are offering APYs well above 4.50%, compared to the national average of around 0.46% for standard savings accounts.

Access the Money Easily
One of the greatest advantages of a savings account, as opposed to another type of investment option, is that you are easily able to access the money if needed. You can move it online to a checking account, withdraw it from an ATM, or go into the bank if needed when you need to get cash or access the funds. Getting money from a CD or Bond can be more difficult. Unlike a certificate of deposit (CD), which typically locks in funds for a fixed term with an early withdrawal penalty, a standard savings account gives you flexibility without sacrificing FDIC insurance protection.

Once you have decided that you want to start with a savings account, you have to decide what type of savings account is going to be the best for your child’s current and future deposits. There are different types based on your savings goals, bank of choice, and even age or education status. Ask each bank you’re considering using about these choices.

Standard Savings Account
Basic savings options and account access. This will have a low annual percentage yield, but it will be consistent, and you aren’t at any risk of losing the money you have in the account. You may be required to keep a minimum balance in this type of savings account. Many major banks including Wells Fargo and Chase offer standard savings accounts for minors that require little to no minimum opening deposit.

Market Accounts
A money market account has the highlights of a savings account, but also can work as a checking account. You can write checks out of this account if needed for your child, while still gaining interest on the money that is sitting in the account. If you need the money in the account to be easily accessible, this would be for you. The Federal Reserve classifies money market accounts as savings deposits, meaning they still carry the full benefits of FDIC or NCUA insurance coverage.

High-Yield Savings
This type of savings account will have a higher annual percentage yield than other savings options, for you to earn the maximum amount of interest on the money you have sitting in the account. Online banks like SoFi and Ally Bank have consistently led the market with some of the highest available APYs. If this is what you are interested in, be sure to read the penalties that there will be for taking the money out of the savings account multiple times in a month or year.

When you are looking at different banks there are things to take into consideration. Many credit unions offer higher interest rates on savings accounts in comparison to brick-and-mortar banks. This is a key reason that the National Credit Union Administration (NCUA) insures credit union deposits similarly to how the FDIC insures bank deposits — up to $250,000 — giving families equivalent protection. This is also why there are specific qualifications for a credit union membership.

Online savings accounts are often also offering higher interest rates. This is because they don’t have offices for people to walk in and out of, so they don’t have to pay as much overhead, along with commercial property expenses and more. If you are trying to earn the most amount of money possible on what will be deposited, a credit union or online bank may be the way to go. According to Experian’s savings account research, online banks frequently offer APYs that are 10 to 25 times higher than those at traditional brick-and-mortar institutions.

If you are trying to teach your kid about money, there are special accounts for kids and students that have special rates and advantages. Talk with the bank about these potential programs and what the perks are for enrolling your child. Benefits can include things like overdraft protection, and higher interest rates. The CFPB encourages parents to look for accounts with no monthly maintenance fees and built-in parental monitoring tools when selecting a youth savings account.

Be sure that any bank you are considering using is backed by the FDIC. You want to know that the bank is insured and that it’s safe for you to deposit your child’s money. If you are looking to save for things like college, talk with the bank about opening a 529 account, in addition to a traditional savings account. The IRS allows 529 contributions to grow tax-free when funds are used for qualified education expenses, as outlined in IRS Topic No. 313.

You will be charged taxes on the interest that is earned from the money sitting in the savings account, so be sure to remember this when it’s time to file your taxes at the end of the year. This is sometimes referred to as the “kiddie tax” — a rule enforced by the IRS that applies unearned income above a threshold (currently $2,500 for 2026) to be taxed at the parent’s marginal rate. The bank will send you all the necessary documents, typically a 1099-INT form, for any interest earned above $10 in a calendar year.

Teaching your kids to save and invest money and setting them up for a lifetime of financial security and knowledge is priceless. If your child has money and they are ready to start earning on what they have, it’s time to find a provider and deposit all the money right away.

Frequently Asked Questions

Do children need a savings account?

Not legally, but it is strongly recommended. A savings account protects your child’s money, earns interest, and teaches fundamental financial habits. Children under 18 typically require a parent or guardian to open a joint or custodial savings account on their behalf.

What is the best savings account for a child in 2026?

The best account depends on your priorities. If earning interest is the main goal, a high-yield savings account at an online bank like SoFi or Ally Bank currently offers APYs above 4.50%. If teaching financial habits is the focus, a youth-specific account at a local credit union or major bank such as Chase often includes parental monitoring tools and no monthly fees.

What age can a child open a savings account?

There is no minimum age for a child to be named on a savings account. However, minors cannot legally open one independently — a parent or legal guardian must serve as a joint account holder or custodian until the child reaches the age of majority, typically 18.

How much money should I put in my child’s savings account?

There is no required minimum beyond what a specific bank sets (often $0 to $25 for youth accounts). Financial experts generally recommend starting with whatever you can afford consistently, as the habit of saving matters more than the initial amount. Even depositing $25 to $50 per month can grow meaningfully over time with compound interest.

Is a savings account or a 529 plan better for my child?

They serve different purposes and can work together. A 529 plan is specifically designed for education expenses and offers tax-free growth under IRS rules, but funds are restricted to qualified education costs. A savings account offers more flexibility for any expense. Many families use both: a 529 for college savings and a standard savings account for general financial goals.

Are children’s savings accounts FDIC insured?

Yes. As long as the account is held at an FDIC-member bank, deposits are insured up to $250,000 per depositor, per institution. Credit union accounts carry equivalent protection through the NCUA. You can verify a bank’s FDIC membership using the FDIC’s BankFind Suite tool at fdic.gov.

What taxes apply to interest earned in a child’s savings account?

Interest earned in a child’s savings account is considered unearned income. In 2026, the first $1,300 is generally tax-free, the next $1,300 is taxed at the child’s rate, and amounts above $2,600 may be subject to the parent’s tax rate under the IRS “kiddie tax” rules. The bank will issue a 1099-INT form for any interest earned over $10.

Can a child earn enough interest in a savings account to make a difference?

Yes, especially in today’s rate environment. A $1,000 deposit in a high-yield savings account earning 4.50% APY would generate roughly $45 in interest in the first year, and significantly more over time through compounding. Starting early maximizes the benefit of compound interest.

What is a custodial savings account?

A custodial account — such as a UGMA (Uniform Gifts to Minors Act) or UTMA (Uniform Transfers to Minors Act) account — allows a parent or guardian to manage assets on behalf of a minor. Once the child reaches the age of majority (18 or 21, depending on the state), full control of the account transfers to them. These accounts are governed at the state level and can hold cash, investments, and other assets.

What is the difference between a money market account and a savings account for a child?

Both earn interest and are FDIC or NCUA insured, but a money market account typically offers check-writing privileges and a debit card option, making it more accessible for everyday use. Standard savings accounts generally restrict the number of monthly withdrawals. Money market accounts often require a higher minimum balance, sometimes $1,000 or more.