How to Open a Savings Account for a Child
Many banks and credit unions offer special kids savings accounts that enable your young child or teen to "level up" from a piggy bank in their bedroom and begin learning how to save and use a bank account. Whether you want to help build your child's balance or your child needs an account to bank their income from an allowance or a part-time job, a youth savings account provides an opportunity to earn some interest, while also learning how to bank and build a savings habit. To choose a kids' savings account, you'll want to pay attention to the interest rate, any fees or minimum balance requirements, the way you and your child can access the funds, and how the account can grow with them as they mature. We've done the research for you, building an expert list that makes it easy to choose a winning account based on what you and your child value most. Capital One With interest paid on any balance amount, excellent mobile banking tools, the ability to establish multiple savings goals, and the option to grow into a youth checking account with a debit card, Capital One's Kids Savings Account is our winner for all-around best youth savings account. Pros Interest is paid on any balance No minimum balance and no fees A top-rated mobile app that includes parental controls Availability of a Teen Checking Account with debit card Cons Interest rate is lower than other options Multiple savings goals require opening multiple accounts No ATM fee refunds on the checking account Capital One has put more thought and effort into youth banking than a lot of its competitors, creating not only two account types for kids and teens, but investing resources into developing kid- and parent-centric mobile app experiences specific to these accounts. Combined with no minimum balance to earn interest, no fees, and the ability to advance to a teen account with a debit card, these features make Capital One our overall pick for Best Kids Savings Account. No matter how much or how little your child has in their savings account, Capital One currently pays 0.30% APY (as of April 2021). Though it's far from the highest rate you can earn on a youth account, the absence of a minimum or maximum balance makes it versatile. In addition, if your child moves into or adds a Teen Checking Account at Capital One, they'll earn a little bit of interest on that account balance, too, to the tune of 0.10% APY. Interacting with the account is enhanced for both kids and parents by the well-designed mobile banking app, which enables automatic transfers from parent accounts to the youth account (think automated allowance payments) and the establishment of savings goals that will motivate your child to keep saving. The app is even more robust for the Teen Checking Account, offering separate parent and teen interfaces and providing parental controls. Capital One's Teen Checking Account is slightly misnamed, as it's available to any child age eight or older. This provides earlier access to a debit card than accounts that reserve this feature for kids age 13 and up. See the full Capital One review. USAlliance For parents starting their child's account at a very young age, it's hard to do better than USAlliance's MyLife Savings for Kids account. Its annual birthday bonus for pre-teen savers helps make it our top savings account choice for young children. Pros $10 in "birthday bucks" paid every year through age 12 Highly competitive interest rate Ability to move into a checking account at age 13 Joining the credit union is easy and virtually free Cons No ATM or debit card access until age 13 Credit union membership is required for both parent and child A few accounts pay a higher interest rate, or on higher balances USAlliance understands how much children love birthday gifts, and parlays that into a reward for kids having their own savings account. By paying those under 13 a $10 birthday bonus every year, plus a generous interest rate on top of that, USAlliance's MyLife Savings for Kids wins our award for best youth account for young savers. The earlier you open one of these for your child, the more "birthday bucks" they'll score. They'll also earn a highly competitive 2.00% APY on their balances up to $500. Very few youth accounts currently pay above 1%, so the earning potential here is significantly higher than most other options. USAlliance also offers a MyLife Checking for Teens, allowing your child to add the more advanced account as they mature. They can open a MyLife Checking at age 13, and choose to receive an ATM or debit card at that time. Meanwhile, they can retain their MyLife Savings account to continue earning a high interest rate on up to $500 in savings. Though USAlliance Financial is a credit union, it is open for anyone nationwide to join. The process is easy and requires just a $1 deposit into your first account. Alliant Credit Union Alliant Credit Union starts your child's saving journey outright with a competitive interest rate, no fees, and an excellent mobile banking app designed for kids and parents. Then as your child ages, Alliant's Teen Checking provides even more useful features, making it our pick for best savings account for teens. Pros Competitive interest rate Mobile banking app that provides child- and parent-friendly features Teen checking account with debit card available at age 13 Teen checking pays interest and offers ATM fee refunds Cons Interest is only paid when balance is $100 or more No ATM or debit card before age 13 Some youth accounts pay higher interest For younger children, learning how to bank is an evolving process, and Alliant provides an excellent Stage 1 option with its Kids Savings Account, followed by an even more impressive Stage 2 option with its Teen Checking Account. Both pay competitive interest and offer well-designed mobile app experiences geared specifically toward kids and parents, making Alliant our winner for best savings account for teens. An Alliant Kids Savings Account can be opened for a child of any age, and anytime the account balance exceeds $100, Alliant will pay a respectable 0.55% APY (as of April 2021) with no maximum balance for earning that rate. The account can be accessed with a mobile banking app that has parents and kids in mind; it lets parents set automated recurring deposits into their child's account, and allows the child to monitor their balance, deposit birthday checks, and track progress toward a savings goal. Once your child turns 13, they can add an Alliant Teen Checking Account and ATM/debit card. This is one of the best youth checking accounts nationally available, paying more interest on checking balances than most other accounts (0.25% APY as of April 2021, compared to the 0% that most teen checking accounts pay). What's more, Alliant offers free ATM transactions at 80,000 ATMs nationwide, as well as up to $20 per month in ATM fee reimbursements. Though Alliant is a credit union, joining is open to everyone and is both easy and free. In fact, Alliant will even contribute the $5 initial deposit into your child's savings account. Spectrum Credit Union With the interest rate on Spectrum's youth savings account so high it looks like a typo, the credit union earns our top marks for maximum interest earnings in a kids account. Pros Pays the highest nationally available APY on a savings account Account can be held until age 21 Account holders age 13 and up can request an ATM card Cons No accompanying teen checking account available Limited to one MySavings Youth Account per individual Joining the credit union is not free for most people With bank interest rates as low as they currently are, it's hard to believe Spectrum's youth savings account rate of 7% APY. But for balances all the way up to $1,000, kids can earn this ultra-premium rate, the highest we found (by a mile) for any nationally available youth savings account (or adult account, for that matter), making it an easy choice for the best youth account to maximize interest. Spectrum doesn't offer a teen checking account, but it does allow kids to keep their MySavings Youth Account (and its stellar interest rate) longer than most other banks do, all the way through the age of 21. It also allows those age 13 and up to opt for an ATM card. Account balances above $1,000 revert to the Primary Share Savings APY of 0.30%. As a credit union, Spectrum does require joining in order to open an account, and though the process is easy, it is not free. Unless someone in your family is eligible through their employer or geographical residency, individuals must donate $15 to an affiliated nonprofit organization to gain Spectrum eligibility. In addition, a member must hold $25 in a savings account (though you will get this back should you ever end your credit union membership). One side note is that Spectrum has a sister institution, Chevron Federal Credit Union. Though the eligibility rules are the same for those who don't qualify another way, Chevron is open to a different set of employees and geographical residents, so it's worth checking if you qualify for one or the other to avoid the $15 donation. Courtesy of Northpointe Bank Northpointe Bank's Kids' Savings Account is a bit more basic in features than some of the others. But what it has going for it is a high interest rate that's available with relatively high balances, earning it our award for best youth savings account for substantial savers. Pros Much better than average interest rate on balances beyond $10,000 No minimum balance or fees Since it's a bank, requires no membership Cons Fewer bells and whistles than other accounts On the first $1,000, some accounts pay more interest No available teen checking account For kids and teens with a lot of cash to stash in the bank, it's hard to earn a great interest rate on all of it, with the highest APYs being capped at low maximum balances. Northpointe Bank takes a different tack, trading fancy account features in exchange for offering a great interest rate not just on low balances, but on high ones, as well, making it our winner for best savings account for kids with substantial savings. Like some other contenders, Northpointe's best rate of 1.50% (as of April 2021) is restricted to the first $1,000 in a youth savings account. But while other accounts drop to minuscule APYs after the threshold, Northpointe pays an excellent 1.11% on the balance between $1,000 and $10,000. That means a $5,000 balance will earn a blended rate of 1.19% APY, and even $10,000 will earn a blended 1.15% APY. Though a minority of teens will out-save the $10,000 threshold, even above that amount, Northpointe's rate is more competitive than almost all other youth accounts, paying 0.35% APY on the balance beyond $10,000. As a bank, Northpointe doesn't require meeting membership eligibility requirements, so the process of opening an account is one step simpler. On the negative side, however, it offers no other youth accounts. Pen Air Federal Credit Union Pen Air Federal Credit Union applies a different strategy to rewarding kids for saving. Instead of paying interest, it offers cash bonuses at certain savings milestones, earning it our top slot for best youth account with savings incentives. Pros Cash bonuses are paid to reward the child's saving progress Youth checking account available at age 8, including a debit card option No fee or donation to join the credit union Cons No interest paid other than the cash bonuses Must open the account with $25 or more Joining the credit union requires keeping $25 in a member savings account When your child opens a Level UP Savings Account at Pen Air, they're rewarded right away for becoming a saver. That's because Pen Air's first cash bonus is earned simply upon opening the youth account, paying a cool $10. Add two more cash bonuses that kids can strive to earn and you can see why Pen Air's account is named our best for incentivizing youth saving. Pen Air Federal Credit Union allows you to open a Level UP Savings Account for your child as soon as they're born, and to keep it until they turn 18. After the initial $10 bonus for opening the account, the credit union will also pay your child $20 when their account balance first reaches $250, and another $30 if they achieve a $500 balance. Pen Air also offers an accompanying Level UP Spending Account, which can be opened anytime after turning eight. This account includes a debit card, along with a mobile app offering parental controls, making it a good choice for parents who want their younger child to have debit card access. Though Pen Air is a credit union, joining it is free and easy. It does, however, require that you hold $25 in a member savings account for as long as you are a member of the credit union. For an account that pays interest, offers a well-designed parent- and kid-focused mobile experience, and provides an easy on-ramp for your child to advance to teen checking, Capital One has all of your bases covered. But there are other winners if you instead prioritize maximizing earned interest, or taking advantage of incentives and rewards that will motivate your child to save more. With our list of category winners, finding the best youth savings account for you and your child should be a snap. Kids or youth savings accounts are bank or credit union accounts available only to those customers under the age of 21, though sometimes capped at age 12 or 18. The best ones pay higher interest rates than adult accounts as a way to incentivize young savers. However, the balances on which those higher interest rates apply are often capped. A youth savings account for a child under 18 will always require joint ownership with an adult, generally the child's parent, grandparent, or guardian. As such, the adult account holder has full access and transactional authority over the account, while the child generally has some limitations on transactions they can conduct. Whether or not your child needs to pay taxes on their savings account earnings depends on how much unearned income they've received during the year. Unearned income includes earnings such as bank interest and investment income, and any amount below $1,100 is exempt from income tax under the "Tax On A Child's Investment And Other Unearned Income" rule, more commonly known as the Kiddie Tax. If your child's yearly unearned income exceeds $1,100 but is under $2,200, the amount above $1,100 will be taxed at the child's rate, which is usually low or zero. But if they earn more than $2,200 in unearned income in one year, the amount above that threshold would be taxed at the parents' (usually higher) rate. For many children, especially young ones, they are unlikely to earn more than $1,100 in interest, essentially making their earnings tax-free. Most banks and credit unions, including all of those recommended above, allow online account opening, making it easy to start the process at home and on your schedule. However, because these are accounts for minor children, you (or another adult who will serve as the primary account holder) will also need to apply. So before beginning the online application, have your driver's license handy. For accounts held at credit unions, you need to establish membership in the credit union. Often this is done as part of the online application, though occasionally you may need to establish membership first and then come back to open an account. In any case, both the adult account holder and the child will need to apply for credit union membership. After the account is open, you may need to set up the initial funding as a separate step. This may also involve linking to one of your accounts at another institution. To handle all of these steps, it's good to allow three to five business days for everything to finalize and your child's account to be ready for normal activity. A clear benefit of establishing a youth savings account is creating a learning opportunity for your child on money management, how to bank, and the importance of saving. Not only can they learn the logistics of how to use a bank account, but they can also begin to appreciate the value of seeing their balance grow, including from earned interest and other rewards. If you save for your child in a bank account in your own name, they won't be able to view the account or implement transactions. In addition, the earnings on the account would be taxed at your adult taxpayer rate, diminishing the returns your child can earn on their savings. We began our research by first identifying almost two dozen youth savings accounts that are available to consumers nationwide and that pay at least 0.25% APY. From there, we dug into the details to find those that charge no fees, offer the highest interest rates, and allow the highest balances, and offer a complimentary checking or spending account. We also considered the age limits of each account, the mobile app features, and any added perks offered by the account, enabling us to distill the list down to these top six contenders. The Best Savings Accounts for Kids for 2021
Best Overall : Capital One's Kids Savings Account
Best for Young Children : USAlliance Financial's MyLife Savings for Kids
Best for Teens : Alliant Credit Union's Kids Savings Account
Best for Maximizing Interest : Spectrum Credit Union's MySavings Youth Account
Best for Substantial Savers : Northpointe Bank's Kids' Savings Account
Best for Savings Incentives : Pen Air Federal Credit Union's Level UP Savings Account
Final Verdict
Compare the Best Kids' Savings Accounts
Category & Winner Age
limits Minimum balance Interest
rate Special
features Capital One
Best Overall Up to age 18;
checking available at 8$0 0.30% APY Top-rated mobile app USAlliance Financial
Best for Young Children Up to age 12; checking available at 13 $0 2% APY on first $500 $10 annual birthday bonus through age 12 Alliant Credit Union
Best for Teens Up to age 18;
checking available at 13$100 to earn interest 0.55% APY
on balances over $100Excellent teen checking, with ATM fee refunds Spectrum Credit Union
Best for Maximum Interest Up to age 21 $0 7% APY on first $1,000 Highest youth account APY Northpointe Bank
Best for Substantial Savers Up to age 21 $0 1.50% APY up to $1,000, then 1.11% APY to $10,000, then 0.35% beyond $10,000 Excellent blended interest rate for high balances Pen Air Federal Credit Union
Best for Savings Incentives Up to age 18; checking available at 8 $25 Cash bonuses instead $10 bonus for opening, $20 for $250 balance, $30 for $500 balance Frequently Asked Questions
What Are Savings Accounts for Kids?
Do You Pay Taxes on Children's Savings Accounts?
How Can I Open a Savings Account for My Child?
What Are the Benefits of Opening a Kids Savings Account?
How We Chose the Best Savings Accounts for Kids
How to Open a Savings Account for a Child
Source: https://www.investopedia.com/best-savings-accounts-for-kids-5179494
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