How to Open a Bank Account for a Baby

Opening a bank account for a baby provides a strong foundation for their financial future. It offers a practical way to manage gifts, save for future expenses, and introduce financial concepts as they grow. Establishing an account early allows compounding interest to work over many years, potentially accumulating a substantial sum by the time the child reaches adulthood. This creates a formal place for monetary gifts to be saved and grow.

Understanding Account Options

Several account types are available for a baby’s bank account, each with distinct characteristics regarding control and ownership.

Custodial accounts, established under either the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), are common. An adult, known as the custodian, manages the funds for the minor, and the money is legally the child’s property. The custodian makes all investment decisions, and withdrawals must be for the child’s benefit. Control of the account transfers directly to the child when they reach the age of majority, typically between 18 and 21 depending on the state. UGMA accounts generally hold financial assets like cash, stocks, and bonds, while UTMA accounts offer broader flexibility, accommodating real estate and other tangible assets.

Joint accounts involve a parent or guardian as a co-owner with the child, offering shared control and access. These accounts are simple to establish and allow the adult to monitor the child’s spending and transfer funds easily. However, because both parties have full ownership, either the parent or the child can withdraw all funds, which could expose the child to the parent’s creditors. A joint account may not always be the best option for long-term savings intended solely for the child, as the funds are not legally segregated like a custodial account.

Many financial institutions also offer general savings accounts designed for minors. These accounts often mimic adult savings accounts but include features for parental oversight. They typically require a parent or guardian to be a joint owner or to maintain control until the child is older. Some may offer perks like no minimum balance requirements or monthly fees, and competitive interest rates.

Gathering Necessary Information and Documents

Assemble all required information and documents for both the baby and the parent or guardian.

For the baby, institutions typically require their full legal name, date of birth, and Social Security Number (SSN). Any interest earned on the account will be reported to the Internal Revenue Service under the child’s SSN. A birth certificate is generally accepted as proof of the baby’s identity and date of birth.

For the parent or guardian opening and managing the account, several forms of identification are necessary. This typically includes a government-issued photo identification, such as a driver’s license or passport, and your Social Security Number. Proof of your residential address, such as a recent utility bill or bank statement, is commonly requested. In some cases, documentation verifying the relationship between the adult and the child, if not evident from the birth certificate, might be needed for custodial accounts.

An initial deposit is almost always required to open a new bank account. This amount can vary among financial institutions, ranging from $0 to $100 or more. This deposit can be made in various forms, including cash or a check.

Steps to Open the Account

The first step involves selecting a financial institution. Factors to consider include the bank’s proximity, online banking features, and any associated fees or minimum balance requirements. Many banks offer specialized accounts for minors with advantageous features and lower fees.

You will typically need to visit a branch in person to complete the account opening. While some institutions offer online application options, opening a minor’s account often requires an in-person visit due to the need for identity verification for both the adult and the child. Calling ahead to schedule an appointment can ensure a banking representative is available to assist with specific requirements.

During the appointment, complete the bank’s application forms. These forms require personal details and identification information for both the baby and yourself. You will sign various agreements acknowledging the account’s terms and conditions, including management rules and deposit/withdrawal procedures. The bank representative will verify your physical documents, such as birth certificates and photo IDs.

After forms are completed and verified, make the initial deposit. The bank will then provide account details, including the account number and routing information. They will also guide you through setting up online access for convenient monitoring and management from home.

Managing the Account After Opening

Once the bank account for the baby is established, understanding its ongoing management is important.

For custodial accounts, while you, as the custodian, control the funds and make investment decisions, the money legally belongs to the child. This means any withdrawals from a custodial account must be used for the child’s benefit, such as for education, healthcare, or general support. Joint accounts, however, offer more flexibility as both the parent and child (or guardian) have full access and control over the funds.

Future deposits into the account can be made through various methods, including direct transfers, mobile check deposits, or in-person deposits at the bank. For withdrawals, especially from custodial accounts, careful consideration is needed to ensure they align with the child’s benefit. Unlike custodial accounts, joint accounts allow either account holder to make withdrawals without specific restrictions on usage.

Tax considerations are a significant aspect of managing a baby’s bank account, particularly concerning unearned income generated from interest or investments. The “Kiddie Tax” rules apply to unearned income of children who meet certain age and dependency criteria. For the 2025 tax year, the first $1,350 of a child’s unearned income is tax-free. The next $1,350 of unearned income is taxed at the child’s tax rate. Any unearned income exceeding $2,700 for 2025 is taxed at the parent’s marginal income tax rate. This structure aims to prevent higher-income individuals from shifting investment income to children to benefit from lower tax brackets.

Custodial accounts, specifically, have a defined transition of ownership. When the child reaches the age of majority, which varies by state but is typically 18 or 21, the custodian must transfer full control and ownership of the account to the now-adult child. At this point, the former minor gains complete access to and control over the funds, and the custodian’s management responsibilities cease. This transition marks a significant milestone in the child’s financial independence.