Savings accounts for babies: What to know

Edited by: David Heiling
• Updated •3 min read
Young black father facing up on a bed, with his infant child smiling and touching his faceImage: Young black father facing up on a bed, with his infant child smiling and touching his face

In a Nutshell

Opening a savings account for your baby can be a great step to set your child up for future financial success. To take advantage of compounding interest and grow your savings over time, the sooner you start the account, the better.
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After you have your first child, you may find that raising a child is more expensive than you initially realized. Creating a budget is a great start, but how do you prepare for your child’s financial future when you’re still building your own?

You may want to consider opening a savings account for your baby. Perhaps one of the best ways to start saving for your baby’s financial future is to start saving while they’re young so the money has adequate time to compound and grow.

Why start a baby savings account

Starting a savings account for your newborn baby might not be the first thing that comes to mind when preparing for a new child, but it might be worthwhile to consider adding it to the list. With little to no maintenance and fees, opening a savings account for your baby can help you reap the benefits.

You can …

  • Start saving for future expenses — By saving small amounts over time, you’ll build up a reserve to pull from when it’s time for your child to get braces, own a car or attend college.
  • Take advantage of compounding interest — Starting a savings account when your child is young allows the money to grow and compound over time.
  • Teach your kids about managing money — As your baby grows up, their savings account can be a tool for learning the importance of saving and managing their finances.

Types of savings accounts for babies

Before you open a savings account for your child, consider which type is right for your financial goals. Whether it’s a simple savings account or a compounding interest plan, starting early is the best way to see it grow over time.

Traditional savings account

A traditional savings account in the form of a deposit savings account, money market account or certificate of deposit is designed to earn interest on your savings with little to no risk.

You have a few options when opening a savings account for your child. You could open a custodial account, such as a Uniform Transfers to Minors Account (or UTMA) or a Uniform Gifts to Minors Account (or UGMA), on behalf of your child.

The custodian controls the money in the account until ownership is transferred to the child once they are 18 or 21, depending on the state.

Perhaps a more flexible option is to open a joint savings account that you and your child share access to.

College education savings account

Various savings accounts exist, but one of the most important accounts could be your baby’s college fund.

When saving for a college education, you should give the principal balance as much time to grow as possible. For example, you can open a 529 College Saving Plan as soon as your baby is born, and you’ll give your child 18 years of potential growth they can later tap into for college tuition and expenses.

The Coverdell Education Savings Account is another great option to save money for your child’s future education. This tax-deferred savings account isn’t just for higher education. It can also cover qualified educational expenses at elementary, secondary and post-secondary levels. 

High-yield savings account

High-yield savings accounts capitalize on compounding interest to grow your savings over time. Before opening an account, compare annual percentage yields, withdrawal limits, fees and minimum deposit requirements.

FAQs about savings accounts for babies

Can I open a savings account for my baby?

Yes. Whether you’re a new parent or will become one soon, opening a bank account for your baby could be a great way to help protect your child’s financial future.

Is it a good idea to open a savings account for a child?

Opening a savings account for a baby can ensure your child has savings to rely on for the long term. The account structure will depend on if your child is depositing money or if you will be making the contributions. The right account for you and your child depends on your financial goals and current circumstances.

Can I open a children’s savings account online?

Yes. Whether you’re starting a baby savings plan or getting other older children involved with banking, many online savings accounts are available.

What’s next: Start saving early

By starting early, you can benefit from growing your baby’s savings over the years. When it comes time to buy a car, pay for college or cover unexpected expenses, you can have the funds you need already saved.